News Update

UK pushes to be ‘China’s best partner’ despite fears – CNBC

“UK can be China’s best partner in the West,” Osborne proclaimed on Twitter, in one of a host of tweets with the hash tag #UKChina from the visit.

Announcements on Monday included a move to extend the renminbi/sterling swap line—an agreement to exchange one currency for another at a set rate at a certain time in the future.

The U.K. was the first group-of-seven (G-7) country to establish a currency swap line with China, in 2013, and in another first on Monday, the Treasury said that London would be the first foreign city from which China will issue a renminbi-denominated note. In addition, the U.K. and China will carry out a feasibility study on a stock connect between London and Shanghai equity markets, following the launch of a similar scheme in Hong Kong.

The moves to ease U.K. investors’ access to Chinese equity markets comes amid a period of intense instability in China’s stock markets: There has been a slump of around 40 percent in Shanghai stocks since a peak in June. This has raised concerns about the U.K. banking system’s exposure to China – which is among the world’s highest in both absolute terms and relative to the size of its total foreign claims according to a recent note by JPMorgan. Plus, investors and politicians alike remain fearful of an economic “hard landing” for China and the potential ramifications for the rest of the world.

The U.K. Treasury acknowledged such concerns in a statement ahead of the trip on Friday, in which it said that China remained hugely important to the global economy, despite the slowing growth that could see it fail to expand by the targeted 7 percent this year.

The Treasury noted that the slower-expanding China would still represent one-quarter of global growth and that it contributed almost 15 percent of world gross domestic product (GDP) in 15 percent.

UK pushes to be ‘China’s best partner’ despite fears – CNBC

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