STOCK MARKET WATCH -- Monday, 4 November 2013

[Ghost Dog]

4. China set to liberalise finance; London hedge funds, estate agents salivate

... In the US, there has been much agonising over the emergence of China as a rival economic superpower. America's trade deficit with China has been a particular cause of concern, with Beijing accused of manipulating the renminbi exchange rate to dump goods in the west. Fears have been expressed that America is vulnerable to a financial Pearl Harbor: a sudden decision by Beijing to stop buying US Treasury bills.

In the light of what is going to be discussed later this week, such fears look overblown. That's not just because such a move would be a pyrrhic victory for China, since it would destroy the value of its assets. It's also because bit by bit, China's economy – if not its political structure – is being reshaped along the lines sought by Wall Street and by American-owned transnational corporations.

Back in the late 1990s, US multinationals demanded that China accept more stringent conditions than had been imposed on other developing countries in order to secure WTO membership. Beijing accepted. Now America wants two things: China's financial sector to be opened up to US banks and the country's savings to boost western capital markets. More than likely, Washington will get its way, perhaps not immediately but with profound effects.

Why? Well, consider this. America, the world's biggest economy, has savings of $2.8tn (£1.7tn); China has more than $4tn. As a result, the impact of financial liberalisation in China will make the flow of funds into the west from Russian oligarchs look inconsequential.

As Diana Choyleva of Lombard Street Research notes, China's elite already sends its children to Britain to be educated. The money is about to follow. Which is why the hedge-fund owners of Mayfair and the estate agents of Belgravia have every reason to be cheerful.

/... http://www.theguardian.com/business/economics-blog/2013/nov/03/china-liberalise-finance-hedge-funds-estate-agents

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