Posts Tagged ‘Edward Luttwak’

Investing, the Chinese way

In China, Financial competency on 24/06/2015 at 2:18 pm

Sun Tzu’s “The Art of War” is widely read as a manual of how to win victories without fighting*.

There is no equivalent of a Chinese “The Art of Investing”.

But here are two precepts that the FT has gleaned from throwing fortune sticks:

The motto of mainland investors has long been that he who does not believe in the greater fool theory is the greatest fool.

High valuations will make it easier and cheaper to recapitalise state-owned groups, hence a reason why the Chinese authorities seem pretty relaxed about stroking an equity bubble.

“We think it would be premature to call an end to this rally, given the importance of the stock market to helping China’s state-owned enterprises and key industries obtain much-needed financing, and the likelihood of more monetary easing,” HSBC also says.


*Edward Luttwak (he would have been a strategist during the period of the Three Kingdoms or the Warring States) wrote a book on Chinese strategy, and pointed out waz wrong with Sun Tzu’s precepts.

Coming in for criticism by name is Sun Tzu, whose writings of 2,500 years ago, including “The Art of War“, are the main source of what Mr Luttwak calls “the flawed principles of ancient unwisdom”. He grants that the cunning statecraft, stratagems for deception and diplomatic finesse advocated by Sun Tzu may have worked when used by one warring Chinese state against another. But he argues that these doctrines have served China poorly in fending off other adversaries.

With a quick pass through the history of China’s engagement with Jurchens, Khitans, Mongols, Manchus and other Asiatic nomads, he notes that China has been ruled by Hans, its ethnic majority, for only about a third of the past millennium. “While Han generals in charge of large armies were busy quoting Sun Tzu to each other, relatively small numbers of mounted warriors schooled in the rudely effective strategy and tactics of the steppe outmanoeuvred and defeated their forces,” he writes.

The bit about being thrashed regularly by the nomads is a fact, not a Hard Truth.