The alliance between the Chinese state – lest we forget, still a (nominally) communist state -- and the high priests of global financial capitalism is close to complete.Among the ironies he notes:
...Asian and Middle Eastern governments – through their investment funds -- increasingly are playing a role in Western economies that voters do not necessarily think their own governments should play.Note: "the City" is London's financial district.
China's investment in Barclays is coming from a lender theoretically devoted to "development" -- both domestic infrastructure lending and subsidized lending to Africa. I guess there is more poverty in the City than I thought. Either that or China Development Bank is now more commercial than China's state commercial banks...
...And it increasingly seems like the highest stage of Chinese communism will turn out to be financial capitalism. I am not quite sure that anyone would have guessed back in 1949 that China’s communist government would be invited into Wall Street and City board rooms – or, for that matter, that China's communists would ever have accepted.
Why is the Chinese government buying everything? A country with a trade surplus is selling more goods abroad than it is receiving in return - the gap is filled by financial assets. That is, China sends goods to the US and receives stocks and bonds in return. China has also been keeping the value of its currency low by selling Yuan for Dollars; in doing so, it accumulates massive Dollar holdings. In the past, this has mainly been invested in US Treasury securities, which has helped keep US interest rates low, but lately China has begun diversifying its investments into other types of assets.