It has become so natural to think of Asia economies such as China and India being the new places for business opportunity while western economies struggle that it is easy to miss the way in which this City of London/Wall Street crisis differs from others in the past.
The tendency in the past was for investment banks to pull in towards the centre in the US when markets were troubled. Banks retreated a couple of times in the early 1990s from China during weak periods for the business.
The opposite is occurring in this downturn. While jobs are being cut in London and New York, they are still being added in India and China and other fast-growing regions such as the Gulf.
This article in the New York Times this morning details the ways in which India is benefitting from the shifting balance. Meanwhile, the FT on Monday recorded how Credit Suisse plans to expand there.
The upshot will be that cyclical weakness in western economies adds to secular trends towards the rebalancing of economies and investment banks.
One interesting question is what long-term effect this will have on London. London has had a great run as an international financial centre and the place from which bankers fly to do business in the Gulf and Asia. But, as local operations in these places develop, London’s role could weaken.
