Osborne Tells China Let's 'Stick Together'

The Chancellor has pledged not to “run away from China”, despite the country’s economic and market turmoil, confirming plans for a stock market link.

In a speech at the Shanghai Stock Exchange, George Osborne attempted to calm concerns that China’s “Black Monday”, the double digit fall in prices last month, would export economic chaos and instability around the world.

He said: "I very deliberately chose to come here, to the Shanghai Stock Exchange, to the epicentre of the volatility in financial markets this summer, to say this:

"Whatever the headlines, regardless of the challenges, we shouldn’t be running away from China."

The comments, made on his week-long tour of the country, come despite many economists warning that the stock market falls were an early sign of deeper problems within the Chinese economy.

Beijing has set itself a 7% gross domestic product growth target this year, but many forecasters expect actual growth to come in considerably lower.

They warn that excessive borrowing, which fuelled a housing bubble and then the recent stock market bubble, could cause weakness within the fast-growing economy for many years.

However, Mr Osborne argued that Britons should put aside such worries.

"Let’s stick together to grow our economies.

"Let’s stick together and make Britain China’s best partner in the West. Let’s stick together and create a golden decade for both of our countries."

The Chancellor said work was underway to create a stock market link between Shanghai and the London Stock Exchange (Other OTC: LDNXF - news) .

The link, which will now be the subject of a feasibility test, would mean brokers in London could directly invest in Chinese shares.

Though some may worry that it could increase volatility.

The Chancellor said: "When we look at the recent volatility in China's market, some ask the question of whether we should maintain the market links we have established over the past few years. I want to take the opposite path, building more bridges over the next five years."

Yesterday Mr Osborne announced a £2bn guarantee to support the construction of a new nuclear plant at Hinkley .

China will be one of the chief investors. He is expected to make a further announcement about Chinese investment in High Speed Two in the coming days (Other OTC: UBGXF - news) .