George Osborne with Chinese Premier Li Keqiang at the Zhongnanhai Leadership Compound in Beijing (Source: Getty)
This is a critical moment in Britain’s relationship with China. The government is clear – we want to build strong links with every part of China and recent volatility should not and will not put us off.
Instead, it should drive us forward. We must seek to integrate China’s financial markets with our own, so they are better able to absorb and respond to shocks.
So that we create a stronger Britain thanks to China and a stronger China thanks to us.
So rather than standing back and being left behind, we must grasp the opportunities China presents to us here in Britain.
It is an opportunity to create jobs and increase investment that the UK can’t afford to miss.
Simply put, we want to make the UK China’s best partner in the West and nowhere is this more important than in financial services.
Britain has already firmly established itself as the Western hub for renminbi (RMB) business.
We were the first ever country outside of China to issue an RMB sovereign bond. We were the first country in the G7 to agree a swap line with China. But we want to go further. As China’s economy develops, so does the need for access to deep and liquid capital markets.
Our ambition is clear: we want to cement London’s position as China’s partner of choice as it raises finance on international markets.
We want to see our stock markets formally linked, with UK firms raising funds from Chinese savers, and Chinese firms listing in London.
That’s why we are delighted to have agreed the most ambitious ever package of financial services announcements between our two countries at the seventh annual UK-China economic summit in Beijing yesterday.
Our package of agreements with the Chinese this week will firmly establish London as China’s bridge to Western financial markets.
We have agreed a number of new bond issuances. The Agricultural Bank of China will issue a green RMB bond here, cementing London’s place as a premier destination for raising green finance, and China Development Bank will issue quasi-sovereign bonds.
The People’s Bank of China will issue an RMB denominated central bank note in London in the near future, the first outside of China.
And we have agreed a landmark feasibility study to explore future connections between our stock markets – opening the door to strong links between our capital markets, a potentially very exciting step forward.
The mutual benefits of connecting our stock markets are clear – increased access to international capital for both British and Chinese companies, and unrivalled investment opportunities for UK and Chinese investors.
As we integrate further, of course we do so aware of the inevitable risks: risks that have come to a head in the last few months with turmoil in Asian financial markets which has reverberated around world.
Our expertise in financial regulation and our deep and liquid capital markets provide a strong foundation from which to build.
So this week we’ve taken the next steps in strengthening our economic links with China and deepening the cooperation between our financial services sectors.
And by strengthening these economic links and integrating our markets we can forge a golden era with more jobs, more investment and higher living standards as a result in both our countries.