The UK will remain open instead of going toward protectionism amid the financial crisis and that will help the country benefit more from the future world economic recovery which will be driven by Asia's growth, particularly the growth of China.
Stuart Fraser, Chairman of the Policy and Resources Committee, sent that message in his recent visit to China.
He told People's Daily Online that he is confident about China's economy although it slowed down to 9.9 percent in the third quarter. At the moment, he said, what China can do for the world economy is to maintain its growth "as much as it can". And he believes that China can achieve that as it is still in the process of urbanization "moving hundreds of millions of farmers from the land to the production".
China's economy is not directly affected by the financial crisis. The main influence of that crisis, according to Mr. Fraser, is the declining demand from the western markets. And that decline will continue.
Mr. Fraser has been in the financial sector in the City of London for 45 years. This is the most serious situation he has ever seen. And this one is different from previous cases, for example, one in 1974, in the way that it happens in a global context. There are 50,000 job losses in the financial sector in London, much more than 30,000 in 1974.
And China probably is a new hope for those who lost their jobs in the City of London or Wall Street. Mr. Fraser suggested Shanghai recruit talents from those places to realize its ambition of becoming a financial center.
He feels that China became more cautious about investing overseas after China found its early investment "quite expensive". He suggested that China invest in non-financial sectors in the western markets to diversity its overseas investment.
Mr. Fraser said China can use the financial crisis as a free "textbook" which is written in trillions of dollars. Lessons to be learned from that "textbook" will help China build a sophisticated financial system which is needed by the country.
For the City of London, Mr. Fraser said the lesson is that it is the misuse of those financial instruments --- putting "an option on the top of an option on the top of an option --- that has caused the crisis.
A reform of the regulatory system is on the horizon. The biggest challenge for policy makers like Mr. Fraser, is to "create a regulatory system which protect us but at the same time allowing talented people to create innovative products and to expand". The reform will cover all financial institutions with a focus on banks. Regulators will consider having talents from the industry at very high salary, "turning them from poachers to goal keepers".
Mr. Fraser thinks the UK and the US economies will be in a "deep recession" for two to three years. The world economy will slow down sharply. The housing prices in the UK were down 15 to 20 percent and will have a further decrease of 10 to 15 percent. And although only people who have to move are affected, people's "feeling of wealth" has changed. That will make people more cautious on consumption.
Mr. Fraser does not think the UK will develop protectionism in dealing with the financial crisis. "People who vote for politicians also like to buy plasma TV from China," he said.
And he promised that the City of London would remain open to keep competitiveness. It welcomes sovereign fund. It welcomes investment from China. The City of London values transparency and China investment has no problem on that so far.
Mr. Fraser believes that as long as the City of London keeps open and attracting talented people from all over the world, it will benefit more than those against globalization when the world economy recovers. Asia, especially China, is the most important source of growth.
By People's Daily Online
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