Shock as company tells China truth

Whether it’s for reasons of realpolitik, greed, gullibility, herd mentality or fear, the world continues its compulsive panda-sycophancy. ASEAN nations rewrite statements on regional security to avoid offending Beijing. Leaders of proud, prosperous and nuclear-armed democracies cravenly cancel meetings with the Dalai Lama out of deference to the Chinese regime. Hollywood amends scripts to appease Chinese nationalism. Consumer goods companies break sponsorship deals with celebrities who commit anti-Communist thought crimes. The UK and Sweden hesitate even to comment when Chinese agents kidnap and extract false confessions from their citizens.

It seems the whole planet is obsessed with pre-emptive shoe-shining of the Middle Kingdom. A few rare exceptions stand out. The New York Times remains largely defiant in the face of Beijing’s wrath over revelations of senior leaders’ family wealth. The Queen damns Chinese officials as ‘very rude’. (Just in: Obama.) Taiwan’s voters and new cat-loving spinster splittist President seem determined to stand their ground. God, despite some recent wavering by His representative on Earth, still boldly refuses to join in the kowtowing.

And to this noble list we can now add MSCI. The company is in the slightly arcane business of compiling stock and other market indexes. Investors use these lists and sub-lists of equities and equity classes (company size, industry, country, etc) as benchmarks. If MSCI adds or increases the weighting of a particular component in an index, investors will buy more of it – to track the index. Inclusion of a company or wider market in an index also bestows status and face. (Hong Kong’s own Hang Seng Index has increased the number of constituent stocks over the years partly because certain older, withering, local family-run companies – who shall remain nameless – kicked up a big fuss when the compilers considered dropping them in favour of newer, bigger listings on the stock market. It was partly because the move would reduce demand for their shares, but also because of the humiliation.)

China’s leaders want MSCI to include the mainland stock markets in the company’s emerging market index – essentially because they think it’s a matter of prestige and one of those overdue status symbols that China has ‘earned’, like having an aircraft carrier or a science Nobel. We are getting close to the national pride/arrogance/victimhood/self-pity complex here.

While Chinese officials crave inclusion of their sizable stock market, MSCI has been brutally honest and said ‘no’. For the third time. The reasoning is inescapable. Real, grown-up stock markets allow international investors to put funds in and take them out as and when they please; China, with its capital controls, does not. Proper stock markets are not subject (mostly) to weird, unpredictable government interventions, arrests of short-sellers, etc; Communist rule-of-man China’s is. Also, Chinese companies are allowed to suspend trading whenever they feel like it and obscure information (and, although MSCI are too polite to say so, many are run by corrupt scumbags who might disappear or be disappeared any time). Peru, on the other hand, passes muster.

So MSCI joins the small elite group of people who dare to treat China as a normal place, nothing special, not an object of automatic toadying. Presumably, the company – unlike Lancome and 99% of the world – sees little to gain from wanton groveling to the panda, and more to lose by tarnishing its international integrity. It has also mentioned the possibility of re-re-reviewing the subject before too long, which should mollify any ‘hurt feelings of the Chinese people’. Aficionados of major Beijing bed-wetting temper-tantrum meltdown freak-outs will probably have to wait for the Court of Arbitration’s ruling on the South China Sea.