Tuesday, May 22, 2007

Communism in China ? Are you kidding ?

The turn of events in China clearly shows that capitalism doesn’t need democracy. Capitalism’s wide diffusion of economic power offers enough incentive for investors to take risks with their money. But capitalism doesn’t necessarily provide enough protection for individuals to take risks with their opinions.

But that’s old news. The latest is that the Chinese are ready to walk the extra mile and do the unthinkable – To let private equity manage a piece of their huge forex kitty, shaming even the most capitalist of countries that view private equity with skepticism. In one final fling, Chinese are ready to consign to hell the Mao Zedong brand of philosophy that shunned private enterprise. I like that gutsy bit - no place for anything that stands in the way of progress – not even venerated ideology.

As per plans, the Chinese government would acquire a $3 billion stake in the Blackstone Group, the private equity firm, in the country’s first effort to diversify its $1.2 trillion in foreign-exchange reserves beyond US treasury bills and into commercial enterprise.

An investment agency modeled after Temasek (the investment arm of the Singapore government and owned 100% by the Ministry of Finance) in China would effectively create the world’s largest hedge fund – voila ! Some analysts say that the China fund’s investment of billions of dollars in the global financial markets could push global asset prices higher, affecting American and European stocks, bonds and interest rates, as well as the value of energy and natural resources in Africa and the Middle East.

Full story here.
Dr.Manmohan Singh, Mr.P.Chidambaram and Guv Y.V.Reddy- even you are having problems with the surge of $$ inflows, aren't you ?...and you wrung your hands in despair while letting the Rupee appreciate...look at your smart neighbour and take a leaf or two - NOW...!

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