Financing growth, re-positioning and innovation to build out ideas that benefit peoples, companies, countries, trade and relationships in the regions in which we participate and extend across their boundaries

It has become popular to assume the inevitability of the rise of India and China and their place among global leaders by 2040. What resources are required in oil, iron and steel, wood, food and water to enable this? What factories, offices, houses, schools, vehicles, roads, productive labour and intellectual property do they have to put in place to convert these materials into value? What capital will they need to do so? As capital is diverted to India and China to finance what is expected to be one of history’s greatest and fastest build-out of national assets, there will be winners and losers. Those winners and losers will include other nations and their peoples, companies, investors and the environment. The price may also include peace.

In India and China, the last decade’s GDP growth was 96.3% and 155.5% respectively. Trade between the two countries has been growing at 34.4% p.a. for the past 10 years. In 2009, during the (G)reat (F)inancial (C)risis the two countries represented 10.8% of gross world product.

Foreign direct investment (FDI) accounted for 4.8% of the total capital formation. Both countries rely on foreign investors. If there is a correlation between the growth in GDP and the rise of capital inflows, we can expect approximately 27.0% of global capital flows to go to the BRICs economies of which 86.0% would be for India and China by 2040.

The flight of capital from India was cUS$14bn during the financial crisis and resulted in a near 60.0% drop in the capital markets. China also had a substantial flight of capital and the Chinese market fell by 65.0%. Both countries governments felt that such sources of capital had proven to be unstable and speculative. It became clear that the rise of the two markets had been characterised by easy entry, auctions, pre-IPO investments, excessive club-deals and some over-confident use of leverage. The countries, investee companies and many investors suffered as a result. The character of capital was shown to be an important factor in selecting investors.

Greater Pacific Capital's more long term approach has been at odds with the market view at that time but has proven to be less volatile than the alternatives. The firm's character has been to pay close attention to the track record and personality of entrepreneurs, the industrial logic of their companies, the positioning in the spectrum of opportunity and risk of opportunities and the price and terms of entry and exit.