In the announcement on Tuesday, which comes during a week-long tour of UK ministers and business to China, led by Chancellor of the Exchequer, George Osborne, Aberdeen CEO, Martin Gilbert, said: “UK business cannot ignore the structural development of China. It is already the second largest economy in the world and will sooner or later surpass the US.
“The work undertaken to obtain a wholly foreign-owned enterprise licence is part of our overall strategy to ensure Aberdeen Asset Management is well placed for the next 10 to 20 years.”
Economic secretary to the Treasury, Harriett Baldwin, went even further saying: “The Chancellor and I are in China to deliver on a key part of the government’s economic plan. We want to secure London’s future as China’s bridge to western financial markets as part of a new golden era of cooperation between our countries.”
While the rise of China is by no means new or, indeed, news, the rhetoric around its rise and its role within global markets has been changing for some time and the broader implications of that change are beginning to become evident as countries and companies jostle for positions both for and against it.
And, judging not only by the comments above but also by its decision to become a founder member of the Asian Infrastructure Investment Bank, a position the US is none too pleased about, the UK seems determined to get in on the ground floor.
Such sentiment was reiterated by Osborne who said on Tuesday that Britain and China would “stick together” and, according to the FT, predicted that the Chinese economy would continue to fuel global growth.
While the US is probably not as displeased with the UK about this latest trip to China than it was with the UK’s decision to join the AIIB, which many perceive as a challenger to the World Bank, it is probably safe to say that it doesn’t warm the cockles of their heart. Eespecially coming, as it does, a few days after the US Federal Open Market Committee’s decision to keep interest rates on hold, largely as a result of external factors – in particular the August’s volatility engendered by Chinese growth concerns.
As my colleague Alex Sebastian argued on Friday, the decision to include external considerations in its monetary policy decision sets a dangerous precedent for the US as it is arguably the first time such a thing has occurred. And, it serves to highlight once more just how important China now is.
Tom Beckett, CIO at Psigma, put it even more bluntly in a commentary on Monday saying the firm believes that the Fed will achieve the necessary confidence levels to boost rates later this year because China, Yellen’s preeminent current concern, should start to see a cyclical economic upswing into the year end.
“This view was confirmed by two meetings with China specialists last week, who (sadly for them) shared our view that an amelioration in the property market and enhanced infrastructure spending will provide a timely, if temporary boost. A ‘wag’ in the office asked me on Friday if this meant that China was now in de facto control of US monetary policy; I replied that it was only fair given they own the whole of the US Treasury market.”
While the last comment may be tongue in check, given the manner in which markets cowered at the prospects of slowing Chinese growth, it is no wonder that the UK seems to be hedging its bets somewhat and backing two runners in this race.
The US may well be closest to raising interest rates in the short term, there is no doubt that we are moving from a unipolar to a multipolar world. And, in a few years’ time the recent volatility and the seismic shifts in global economic power that are behind it may well be viewed as the clumsiest passing of a baton since the 2008 Olympics.
