Interview on China field, emerging markets, etc

Robert Abad, who has spent more than 25 years in the finance world focused on emerging markets, was nice enough to talk to me for his EM mentorship program. Perhaps there are some nuggets of useful information in here.


In the quest to support, develop and inspire the next generation of emerging market (EM) professionals and trailblazers, EM+BRACE spoke with Damien Ma, Fellow and Associate Director of the Think Tank at the Paulson Institute, for some thoughts on EM, mentorship, and careers.

Robert: Throughout your career, you’ve written extensively on the economic, political, and cultural challenges that China faces. How did you get started on this track?

Damien: I suspect that like many others in the field, it was a mixture of serendipity and path dependence. In fact, I seriously thought about enrolling in art school as a high school senior. I remember visiting the Art Institute of Chicago, quickly realizing how talented everyone was there and just how mediocre I was.

No more art school, and I had to pivot. I always had an intellectual interest in international affairs, economic development, and markets. Having been born in Shanghai and raised (humanely and organically) in Vermont, I guess I’ve always internalized multifaceted perspectives and was always trying to figure out how the world functioned and the realities in different corners of the globe. So I considered going into journalism and becoming a foreign correspondent, to not only learn about economic development and forces shaping our world, but to also document history as it happened—at least that was the ideal version of it in my head at the time.

But it turned out that China’s rise was one of those epochal events that met all the criteria I wanted to explore and in which to develop expertise. It’s really THE emerging market of all emerging markets. Let’s face it, without China’s economic performance over the last 15 years, there wouldn’t really be BRICs, since it was in large part Chinese growth that propelled the grouping to stardom. Moreover, this single, continental economy contains both the elements that make an emerging market successful and conundrums that still befuddle less-developed economies. By examining China, you can learn about the East Asian developmental state model, ponder modernization theory, analyze the challenges of economic transition and post industrialization, all the while reading tea leaves about a rather opaque authoritarian government. It has something for everyone—it’s the Amazon of emerging markets!

And of course personally, having devoted so much time and effort to acquiring Chinese language ability, it’s one of those skills you hate to squander. I of course had some training at home, but had to work for years to get to a level of professional fluency with which I was satisfied. So that leads you down a path where you want to find work that leverages those skills. Beyond that, very little was planned.

Robert: Your book “In Line Behind a Billion People” has been very well received, especially because it looks at China through the lens of scarcity rather than abundance. How did that angle come to mind?

Damien: Scarcity is of course a core economic concept. And the idea began as a book narrowly focused on the economy. It was actually a simple insight that we thought, at the time, was missing from the mainstream coverage of China but still colored how Chinese policymakers and the Chinese public thought about their economy. That is, the big denominator problem: “there is never enough if you divide everything by 1.4 billion.” This mentality affected everything from China’s energy and food security policies to its restrictive urbanization politics.

But the more I chewed over it, the more I thought why we couldn’t apply that concept to the political and social dimensions as well. Without understanding how all these elements interacted and related, you wouldn’t get a very accurate reflection of today’s China. This was also at a time before the rapid economic slowdown, when the predominant market narrative was still fixated on Chinese growth.

So the idea evolved into an assessment of China’s key challenges through various dimensions of scarcity, which collectively argued for why the China story was no longer going to be defined by growth.

Now, nearly five years into President Xi’s tenure, my observation is that virtually all the types of scarcities we highlighted in the book are resonating and being prioritized by the current Chinese government. Whether they’re being effectively addressed is another debate. But certainly, from values and ideology to healthcare and urban bias (hukou), Xi is taking all of them on. And of course, Xi’s administration is also deliberately moving away from emphasizing growth.

Robert: Today, everyone seems to have an expert opinion on China. What would you say are the biggest mistakes people make as they try to analyze that country?

Damien: It is true that we’ve seen a democratization of China commentary in recent years. I think this is natural when you become an influential and large economic and political power; everyone wants to weigh in. Just like how most people around the world probably have some opinion on the United States. To paraphrase something in our book—China can no more extricate itself from the world, as the world can be exempt from its impact and influence. This is certainly a testament to China’s overall success.

This is not necessarily a bad thing, and I, for one, don’t subscribe to the view that China experts and specialists have a monopoly on the right take or analysis. I recall seeing an interview with Nate Silver of 538 years ago, in which he mentioned that flying over China at night got him thinking about whether one could measure light intensity as a good proxy for economic activity, because Chinese economic data can be unreliable. I thought that was a very creative idea, and lo and behold, several economists at the Federal Reserve Bank New York apparently had the same idea. They recently published a paper on China’s growth using satellite imaging of light intensity and weighing it against the “Li Keqiang index.”

That said, the downside of the massive flow of information, incessant 24/7 commentary, and insta-punditry, is that quite a lot of context and perspective is lost. That does mean accurate and thoughtful views can suffer or get crowded out amid the noise. And it also makes it much more difficult to separate the signal from the noise.

For instance, one regular mistake the general US commentariat repeats a lot—and it’s not the biggest mistake, just something that irks me to no end—is the conflation of Global Times’ fiery op-eds with “official China.” Yes, GT is state-owned and yes, occasionally it toes the official line. But more often, it is just a troll and engages in provocation because it sells papers. I’ve met GT reporters and editors—they’re mostly young, 20-somethings that think it’s fun to poke the US. And I wish that they were not constantly legitimated in US media as somehow official Beijing.

Robert: Looking back, did you have any mentors that helped shape your thinking on China or political risk. If so, what did you learn from them?

Damien: I’ve had many mentors, both in academia and in the professional world, who have helped me and shaped my thinking, particularly in terms of economic fundamentals, political systems, and the intimate relationship between the two. I was lucky to have studied with some of the top China experts in the world, and to have had opportunities to learn and develop areas of expertise on the job.

And perhaps because a part of me has always been drawn to journalism, I was also very fortunate to have had the mentorship of James Fallows at The Atlantic, whose clarity of prose and incredible ability to distill complex subjects into effective writing I’ve always admired tremendously.

Robert: What words of wisdom can you give to students and young professionals interested in a career in the emerging world?

Damien: I would say that if you want to focus on emerging markets or a region, it’s important to develop a broad and deep knowledge base. A solid understanding of economics is necessary, but insufficient. One would also need to have a good sense of political and social dynamics and history. No market is driven purely by economic fundamentals; numerous factors affect it. So a diverse knowledge base can help you connect dots and think in ways that others may not.

Language skill is of course also important, especially if you want to focus on one or two markets specifically. I think in today’s professional landscape, it’s important to also develop functional expertise in the markets you want to focus on, being a generalist is probably not enough.

Finally, go to that country frequently, or better yet, live there for a while if you can. Really try to figure out how the locals tick, how they think, and whether your empirical observations on the ground align with what you’ve heard or read in your home country. It’ll help you do your job better if you can marry the macro perspective with micro, bottom-up observations and data points that others have missed.

Robert: Damien, thank you so much for sharing these great insights with us today.

Damien: Thank you. I hope that the younger generation realizes just how exciting a time it is to be living through a world in transition and to not retreat from it. And as Americans, we should be especially attuned to how the world is evolving, whether to our liking or not, and adapt well. This is why we need to cultivate a new generation of talent, as every field requires continual renewal, to understand emerging markets because these are the economies that are at the forefront of reshaping our century.

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