Category Archives: China

The accidental trillionaire

China’s $3.9 trillion foreign exchange reserves were not planned but arose as a side effect of a strategy, now ended, of keeping the RMB exchange rate lower than the market would have set it. * Last week I visited the home of China’s SAFE – the State Administration of Foreign Exchange. SAFE’s reserve management division… Continue Reading

Africa’s economic potential: people

Africa’s economic potential is usually thought to lie in its natural resources. But the continent’s people may be its greatest strength. One of the few areas where long term forecasts have some value is demography, the study of population size and structure. The dynamics of population growth depend on a few variables – the current population, the… Continue Reading

Liberalising the Chinese banking system: necessary but dangerous

I recently gave a presentation to the Cambridge China Business Network, a student club. The title is “Like dismantling a nuclear bomb: liberalising the Chinese financial system”. The slides are shown below. Summary Liberalisation of a market means removing most or all regulatory and legal restrictions on market forces. Most countries that have liberalised their financial… Continue Reading

Letter from Shenzhen

I have at last visited Shenzhen, one of China’s four first tier cities (along with Beijing, Shanghai and Shenzhen’s neighbour Guangzhou), as part of the Cambridge EMBA International Business Study Trip. It’s a likeable and impressive city, much greener and cleaner than Beijing and less crowded than Shanghai. It’s also the centre of the Chinese… Continue Reading

Improving prospects for market-based reform in China

Ahead of attending the Cambridge-Beijing Forum on market reforms in China, hosted by Cambridge Judge Business School next month in Beijing, I thought I should check the official Chinese government position. The Chinese Premier (head of the State Council, loosely “Prime Minister”) annually reports on the work of government to the National People’s Congress (NPC).… Continue Reading

Regulation leads to innovation

The Chinese government is in the process of deregulating interest rates. It took the first step in July 2013 when the People’s Bank of China (PBOC) freed the banks to set the rate charged to borrowers, other than some mortgage-related restrictions. It is expected soon to stop controlling the rate paid by banks to depositors.… Continue Reading

Commodities don’t help an investment portfolio

Investing in commodities (oil, gas, metals etc.) has gone from being a niche activity to a mainstream portfolio choice in the last fifteen years. This was driven by the long period of fast growth of commodity prices, which made a number of people very rich. The wider argument for commodities investment though has been that… Continue Reading

How to evade capital controls

The latest data on China’s foreign exchange reserves, showing a rise of $130 billion to $3.4 trillion, suggest that capital is flowing into China again after an apparent outflow ahead of the change of government in late 2012.  There is also growing evidence of Chinese residents smuggling capital into China by disguising it as exports. The… Continue Reading