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What is this “China” that you speak of?

Summary:
The FT has a story about the opening up of China’s financial sector: The race to win a share of China’s fast-growing investment market entered a new stage this week after JPMorgan’s asset management arm acquired majority control of its mainland joint venture, the first foreign player to pass this milestone. The deal was concluded despite a marked deterioration in relations between the US and China, a shift that has added new layers of uncertainty and complexity to the calculations of other international managers pursuing ambitions in China. A useful reminder that while the dogs are barking, the caravan moves on. Expect much more of this in the future: Only last month, Beijing announced 11 new policy measures to open the country’s financial sector to foreign investments

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The FT has a story about the opening up of China’s financial sector:

The race to win a share of China’s fast-growing investment market entered a new stage this week after JPMorgan’s asset management arm acquired majority control of its mainland joint venture, the first foreign player to pass this milestone.

The deal was concluded despite a marked deterioration in relations between the US and China, a shift that has added new layers of uncertainty and complexity to the calculations of other international managers pursuing ambitions in China.

A useful reminder that while the dogs are barking, the caravan moves on.

Expect much more of this in the future:

Only last month, Beijing announced 11 new policy measures to open the country’s financial sector to foreign investments further. These included advancing the removal of limits on foreign ownership of fund management companies beginning in 2020, one year earlier than initially planned. Foreign ownership limits in other types of asset managers — including those set up by banks, insurers and pension investors — will also be relaxed.

“This is another clear signal of China’s determination to encourage greater foreign involvement in its investment market. Permission to participate in building China’s nascent private pension system will be a very significant development for international managers,” said Mr Aldcroft.

One of my commenters was recently shocked to discover that China engages in “spying”, and horrified to discover that I was not similarly horrified. Whenever I point to a positive development out of China, he assumes that I must be an apologist for “China”, as he visualizes the term.  But his view of China is relatively cramped and narrow—just a few negative news stories that he reads in the anti-China media.  I am almost as opposed to his China as is—I hate anti-Muslim authoritarian nationalism—but he fails to realize that his China is not my China.  It’s not the country I am talking about when I discuss “China”.  Or more precisely, it’s just one small piece of that country.

China is an enormous place encompassing an almost infinite number of contradictions.  It includes the Chinese government, the Chinese people, and an often beautiful landscape.  It includes stodgy state-owned enterprises and dynamic high-tech firms.  There is a huge service sector that most westerners know almost nothing about.  It includes brave Hong Kong protestors and delicious Sichuan restaurants.  It includes a million political prisoners in Xinjiang and humanity’s greatest engineering achievement.  It includes the best movie of 2019, and the worst movie of 2019.  It includes my mother-in-law, Michael Pettis, and 1.4 billion other people.

The China in the mind of most westerners is a tiny thing, just a few images.  Even I fall into that trap.  Each time I visit China (and I’m going there again soon) I’m immediately reminded of the vastness and complexity of the place.  China (and India) is not like Paraguay or Denmark.  It would be more accurate to say that China is like the entire western world.  If your dog is named Spot, then the term ‘Spot’ might be adequate for designating your particular dog.  But the term “China” is not enough to designate China.

Most people understand that there is more to America than the NFL, Las Vegas, 400,000 people in jail for drug “crimes”, and the atrocities committed by our government in Yemen.  I wish people understood that there is more to China that a few fleeting images of government atrocities and cultural icons that they might have imprinted in their brains. It’s not that those things are not real, or not important, or even not in many respects much “worse” than in the USA, rather it’s that there is so much more.

This post is not written to change any minds; people find comfort in being prejudiced.  Rather it’s just something I wanted to get off my chest.


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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