...couldn’t it just be that China is proceeding to the beat of its own drum? China will make the claim that it is already allowing wages to rise, which is increasing household purchasing power. But that capital market liberalization is a more difficult and longer-term problem. Step by step, China wishes to open up the relationship between its capital markets and the rest of the world. Incremental steps to allow more non-governmental mainland investment in foreign equity securities; allowing certain global banks to issue RMB debt and complete trade settlement transactions in RMB; McDonald’s Corporation has issued RMB debt; the Chinese government and Chinese companies are issuing long-term debt of 30- to 50-year durations; and now in New York and Los Angeles, the Bank of China allows business customers to exchange about US$3,000 per day and up to a maximum of US$15,000 a year. The deposit base will therefore take time to grow. But Hong Kong, where a similar scheme has already been in place, saw deposits more than quadruple last year to about US$46 billion.
As my colleague, Richard Gao, said to me recently: “China moves deliberately and carefully. The pace may seem very slow, but then you look back and see how far they have come.”
On a lighter note, check out Herbie Handcock and Lang Lang at the White House
