BackStepping out
China will increase its presence in global finance. The Indian response will depend on how policymakers perceive its intentions
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China has agreed to buy more Malaysian government bonds to help a neighbour stabilize its financial markets. The news comes just days after unconfirmed reports in Mumbai said the Chinese have emerged as buyers for the first time of Indian government bonds in the most recent auction. These two developments should be seen against the backdrop of China’s recent attempts to expand its financial footprint through a more open capital account, backing new multilateral financing institutions and making a strong pitch to get the yuan included in the special drawing rights basket of the International Monetary Fund.
There are three factors at play—a desire to spread portfolio risks currently concentrated in the US, internationalizing the Chinese currency, as part of the next round of economic reforms, and using excess capital as a tool of geopolitical leverage.
China will increase its presence in global finance. The Indian response will depend on how policymakers perceive its intentions.
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