"The size of China's displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world."
- Lee Kuan Yew, former Prime Minister of Singapore
Geopolitics is back. It was always here, of course, but as investors we could safely ignore it. Nothing - not the Soviet Union, not Vietnam, not Iraq - could stem the inexorable rise of American stocks, and the lesson of history seemed to be - disregard geopolitics.
But the scale of China is such that this may no longer apply. We're talking 1.4 billion people, divided into 34 administrative divisions, each with an average population of 40 million, each a country unto itself. The wonder of China is that it exists at all.
Economically, China is already a giant, by some measures already bigger than the U.S. in GDP. Its capital markets are among the largest in the world, its banking assets the largest, and it is, even now, our largest trading partner. As investors, we must at least entertain the possibility that this time is different and that geopolitics has finally come home to roost.
The purpose of this series of articles is simple: understand China. It may be an impossible task - China is not only a different country, not only a different culture; it's a different civilization. Of all the adversaries the U.S. could have chosen, we couldn't have chosen one more difficult to understand than China. That makes our goal of understanding it ever more timely.