[SHANGHAI] Britain's finance minister George Osborne called Tuesday for closer business ties with China as he visited its commercial hub of Shanghai, despite slowing growth and stock market volatility in the world's second-largest economy.
Mr Osborne, Britain's Chancellor of the Exchequer, visited the Shanghai stock exchange, which has seen its benchmark index plummet nearly 40 per cent since June as a bubble bursts, while worries over flagging Chinese growth have shaken world markets.
A day earlier Mr Osborne agreed with top Chinese officials in Beijing to study the linking of trading on the London and Shanghai bourses, and the possibility of China's central bank issuing short-term bonds denominated in the yuan currency in London.
"Whatever the headlines, regardless of the challenges, we shouldn't be running away from China," Mr Osborne told business leaders and students packed onto the trading floor of the exchange.
"Let's stick together to grow our economies," he said, adding he deliberately chose to visit the Shanghai bourse, which he called the "epicentre of the volatility in financial markets".
China recently revised downward its 2014 economic growth figure to 7.3 per cent, the weakest in 24 years. In both the first and second quarter this year, growth remained stuck at 7.0 per cent.
"China's undergoing difficult change - but it's still a huge contributor to our economic future," Mr Osborne said.
Valuations on the Shanghai exchange alone have dropped by more than $2.4 trillion since mid-June, after a 150 per cent surge in the previous 12 months, lifted by a borrowing-driven rally encouraged by authorities.
Chinese officials responded with a rescue package, whose hallmarks include banning big shareholders from selling and government buying of shares.
The package has raised questions over Beijing's management and drawn criticism for running counter to promised economic reforms.
But the Shanghai market rose nearly two per cent to the day's high during Mr Osborne's speech, and while it trimmed some of the gains later it closed up 0.92 per cent, in part because of news of the possible stocks link.
Britain and China have agreed to conduct a feasibility study on connecting stock markets, which the British Treasury said in a statement Tuesday would offer investors from both countries more opportunities and provide Chinese firms with financing.
Shanghai and China's special administrative region of Hong Kong, a former British colony, have already linked their markets - allowing investors in each location to trade select shares on the other exchange.
China is studying a similar scheme for its second stock exchange in Shenzhen, which borders Hong Kong, but recent market volatility is widely expected to delay the launch.
The Chinese and British central banks will also increase the size of bilateral currency swaps, though no details were given at the close of a high-level dialogue in Beijing on Monday.
Mr Osborne threw his support behind China's attempt to have its yuan, also known as the renminbi (RMB), to be included in the International Monetary Fund's select group of reserve currencies.
A surprise devaluation of the yuan last month sparked worries over the economy and caused capital outflows from China.
"I would like to see it (the yuan) included alongside pound sterling in the IMF's Special Drawing Rights basket," Mr Osborne said.