Osborne to Say U.K. Should Move Toward China, Not Run Away

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George Osborne
George Osborne, U.K. chancellor of the exchequer. Photographer: Qilai Shen/Bloomberg

Chancellor of the Exchequer George Osborne is seeking to strengthen Britain’s ties with China, including a possible stock-exchange link, as he underlines the country’s value as an investment partner in spite of recent market shocks.

“Whatever the headlines, regardless of the challenges, we shouldn’t be running away from China,” he will say in a speech at the Shanghai Stock Exchange on Tuesday, according to prepared remarks released by the Treasury in London. “Let’s stick together to grow our economies.”

Osborne delivered his vote of confidence in China in the wake of a stock market rout that wiped out $5 trillion in value, a surprise yuan devaluation that roiled global currency markets and mounting concern about the strength of the world’s second-biggest economy. Osborne announced a series of deals including financing for Chinese construction of a new U.K. nuclear plant, possibly linking the U.K. and Shanghai stock markets, and the issue of yuan-denominated bonds in the U.K.

The debt issuance would be the first sale of such notes outside of China and help develop London as a yuan trading hub, Osborne said at a briefing in Beijing Monday at the start of the week-long trip. The study on the equity link will be discussed by the next round of the annual talks, he said.

Hong Kong Link

A similar link between the Hong Kong and Shanghai exchanges that began last year was hailed as a major step in allowing more foreign access to the world’s second-biggest equity market. The Shanghai Composite Index soared 108 percent from the program’s Nov. 17 start through the equity measure’s June peak. The gauge has slumped 39 percent since as local traders unwound margin debt and the outlook for the economy dimmed.

Osborne said last month that Britain was vulnerable to the turmoil caused by the China sell-off, but he will tell his audience Tuesday that he sees the opportunity for China and the U.K. to create “a golden decade.”

Premier Li Keqiang, who heads the government’s economic policy team, briefed Osborne on the government’s response to the market unrest and said China would promote the openness, transparency, long-term stability and healthy development, the official Xinhua News Agency reported. He also told Osborne there was no reason for a further depreciation of the yuan and China did not want a currency war, Xinhua reported.

The chancellor also announced Monday that the U.K. government will provide a guarantee of 2 billion pounds ($3 billion) for the construction of the Hinkley Point C nuclear plant in southwest England in which Chinese companies are involved.

Carbon Emissions

Hinkley Point C is key to U.K. plans to cut carbon emissions and maintain security of its power supply so that electricity generation doesn’t depend on intermittent sources of renewable energy such as wind farms and solar plants.

China has become one of the world’s biggest player in the nuclear power industry with 25 reactors under construction, 37 percent of the global total, according to the World Nuclear Association.

Osborne is heading a delegation of U.K. ministers and business leaders on a week-long trip to China that includes visits to Shanghai, Beijing and Chengdu.

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