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China prepares to liberalise finance as hedge funds and estate agents salivate

The Guardian – It’s a long way from Beijing to Belgravia but London’s upmarket estate agents would be well advised to keep a close eye on developments in China over the next 10 days. The price of a mansion in London’s more fashionable districts is rising fast. Cash buyers from overseas have snapped up houses with little or no regard of the cost, creating a property microclimate divorced from the rest of the market.

The Bank of England is keeping tabs on the boom, concerned that the flood of foreign cash pushing up the price of mansions could – if left unchecked – herald the start of the next bubble.

Well, you ain’t seen nothing yet. The freeing up of China’s economy over the past 35 years has been methodical. First it was agriculture. Then it was industry. Now, the next phase of liberalisation planned by the ruling cadre of the Communist party includes finance.

A host of possible reforms is being considered. These include offering higher interest rates for domestic savers backed up by deposit insurance for savings accounts and making China’s currency, the renminbi, convertible.

Unfettered movement of capital out of China is not going to happen overnight, but it could happen within five to 10 years. That’s why George Osborne was in China last month seeking to make London the global hub for dealings in the renminbi. That is why fund managers, hedge funds, private equity firms and property specialists in Britain are licking their lips.

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