In a speech before members and officials of the Shanghai Stock Exchange late Tuesday, Osborne described as this city's stock exchange as “the epicentre of the volatility in financial markets this summer”.

 

“Whatever the headlines, regardless of the challenges, we shouldn’t be running away from China. The world still needs China’s help. Through the ups and downs, let’s stick together. Let’s stick together to grow our economies,” Osborne said.

 

The UK's top treasury official did not give a timeline for the study, but said the mutual benefits of connecting the two stock markets are clear  including  “increased access to international capital for Chinese firms, unparalleled investment opportunities for Chinese and international investors, enhanced stability for both markets and efficient allocation of resources, acting as the basis for sustainable economic growth.”

 

The proposed London-Shanghai stock connect will most likely be patterned after the Shanghai-Hong Kong stock connect, a cross-boundary investment channel that connects the Shanghai Stock Exchange and the Hong Kong Stock Exchange. 

 

“I want to see our stock markets in London and Shanghai formally connected, with UK firms raising funds from Chinese savers, and Chinese firms listing in London,” he said.

 

Apart from the stock connect, Osborne also brought other capital market initiatives including the Bank of England and People’s Bank of China’s (PBoC) agreement to extend the RMB/Sterling currency swap line.

 

In a related development, PBoC will issue short term central bank renminbi bonds in London, the first time these bonds will be issued outside China.

 

UK also welcomes other new bond issuances, including Agricultural Bank of China announcing its intention to issue a renminbi green bond, the chancellor says.