Money Talks
Is the global economy too hot, too cold, or just right? FP took its temperature by talking to one of Wall Street's most influential voices, Michael Klein, CEO of global banking at Citigroup and vice chairman of Citibank International.
FOREIGN POLICY: Which emerging markets have the best prospects in the short-to-medium term, from the position of an investor?
FOREIGN POLICY: Which emerging markets have the best prospects in the short-to-medium term, from the position of an investor?
Michael Klein: Of course, it’s impossible to look at the growth in India and China and not be impressed. However, the question as an investor is different. If you had invested in the Chinese stock markets over the past five or 10 years, you likely would not have made a significant amount of money. One of the least focused upon factors in these emerging markets is the money coming out. Investors need to focus far more on the capital leaving the emerging markets. There was a 12-month period [in 2005 when] there was more outbound capital from China than there was foreign direct investment.
FP: Which of the oil exporting countries is using its petrodollars most wisely?
MK: In 1998, [Russia was] a $200 billion economy. Today, it’s about a $900 billion economy — part of that is chained to the ruble, but a fair bit of that is growth. They’ve paid off virtually all of their external debt. They’ve got $250 billion of reserves and substantial growth rates.
FP: How long can China continue posting double digit growth?
MK: It’s clear that [the Chinese economy] has been growing more rapidly than most appreciated for 25 years. One has to assume that growth in China will continue in the intermediate term because when a government is spending 42 percent of [gross domestic product] on new capital into the economy — which would be equivalent to $5 trillion a year in the United States — it is going to have a continued drive toward development.
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