The penny is starting to drop for foreign investors in China. Two years into the leadership of President Xi Jinping, there’s little sign of the country opening, relaxing and rebalancing as outsiders expected. It’s likely that 2015 will be another year of missed opportunities.
Xi certainly hasn’t been idle. He has punished bad eggs, including former security chief Zhou Yongkang. Industrial overcapacity and energy intensity are subject to new targets. It even seems normal now to talk about China’s GDP growing below 7 percent – something the ruling Communist Party’s leaders haven’t countenanced for two decades.
But the decisive role for markets that Xi promised has not materialised. Hardly any financial products have defaulted. A feted cross-border stock investment scheme with Hong Kong is capped at a measly 2 percent of the Shanghai bourse’s market capitalisation. Meanwhile, the huge pile of foreign exchange reserves that reflects persistent intervention in the currency markets has swelled by $600 billion since Xi took office.
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