Letter to Shareholders

The essence of the report that was repeated by all international news agencies was loud and clear: “China’s industry is shrinking for the first time in over two years.” They continue: “The reversal ... means a new setback for the Chinese economy, whose growth of 7.4 percent in 2014 was the slowest in 24 years.” It really is astonishing that even serious news agencies and distinguished economists compare the growth momentum of China in 1990, a developing country, with that of the China of today, the number two global economic power of 2015, without differentiating the two to any significant extent. Astonishing insofar as China in 1990 had a per capita gross domestic product of just barely USD 314. In contrast, at USD 6,807 in 2013 (reliable data for 2014 is not yet available), the same figure is more than 20 times higher and approximately at the level of EU member states like Bulgaria and Romania. Naturally, China still has quite a way to go before it can join the countries with truly broad-based prosperity, but today, it is without a doubt far beyond the status of an “emerging nation” and well on its way to becoming a developed economy. It would be an illusion to believe that China—despite the rapidly increasing maturity of its economy—could achieve the typical growth rates of (successful) threshold countries of 7 to 10 percent ad infinitum. On the contrary, in the coming years, we will have to gradually accustom ourselves to a slowdown of the momentum (as far as the numbers are concerned). De facto, China is not going to lose its image of being an attractive growth economy because even as its growth rate is dropping, the gross domestic product is constantly expanding. In other words, if one looks at the situation more closely, the reversal that was mentioned earlier is within tolerable limits.

While the anxieties about China’s growth prospects are manageable—at least for the time being— Europe will need to devote all of its strength and energy in 2015 to continue the battle to regain economic stability at least at a modest level. Only if this succeeds will it be possible in the following years to return to a path of economic growth. In any case, it is not a simple undertaking, as currently the critical developments significantly overshadow the positive ones. The only assets that are offsetting a broad-based political and social sense of uncertainty as a consequence of terrorist attacks by Islamist extremists, a political upheaval with many question marks in Greece, continuing escalation of the Russia-Ukraine conflict, and the troubling emergence of groups at the fringes of the political system are the successful economic turnaround in Ireland, some progress in Spain and Portugal, a new EU Commission that is trying very hard, and a feisty European Central Bank, which is indirectly boosting employment in Europe by devaluing the euro. In any case, a return to growth and broad-based economic success will only be possible if the process is consistently supported by all EU member states together who eschew their individual national interests to the greatest possible extent for the common good and if Europe’s political classes finally comprehend that it is up to them to create the necessary economic framework conditions.

Linz, February 9, 2015

The Management Board