I did glance at the text, and found the entrance of US finance into the Chinese system to be potentially worrying. But there is nothing in the text that gives specific details about how this would work. The main issue being taking in US finance capital while also quarantining its possible destabilizing effects.
Western financial institutions will be neutered so long as capital controls remain in place and Chinese central banks remain independent.
Western financial institutions are not magical or have godly powers. They are only as big and powerful as they are in the west today because of many complex and interlocking factors, some of the main ones being:
-state capture. The financial sector is so overwhelmingly important in most western countries that governments bends to the will of them, and make ridiculous concessions and tailor make rules to benefit them.
-preferential treatment from central banks, and market regulators, especially in terms of interests and fees. Many of their trading models would simply not be viable without this highly tilted playing field.
-insider trading and effective collusion between all the major firms. Just look at the recent London Libor scandal as a perfect example of how deep and wide insider trading and collusion is. And that is just what has been made public. I have friends who worked in the city who have seen far worse first hand.
Also, even without co-ordination, there is a massive amount of group think because most western financial institutions because they all use the same methods and inputs (excluding insider info when looking at the industry at the macro level), so its little wonder they all arrive at the same result. When the majority of financial institutions who collectively control the vast majority of capital in the markets all arrive at the same or similar answer, that moves markets even if they are all completely wrong.
A good analogy would be if a class who has been taught together were taking an exam together at the end of the year, and then their answers were used as votes to decide the ‘correct’ answer.
Capital controls would limit both the ability of western financial institutions to collude through groupthink; and reduce the harmful impact on the economy of vast amounts of hot money rushing in and out, distorting markets.
Lack of state capture would mean western financial institutions won’t get the highly unfairly preferential treatment they currently enjoy in the west. No doubt this lack of favouritism would be spun as some sinister state interference in the western MSM.
But if forced to play on a level playing field, I have confidence western financial institutions would dominate the domestic Chinese market the same way western manufacturing and retail/sales companies are dominating the domestic Chinese market now.
Western firms have only dominated once they entered developing markets because they were able to exploit their size and influence to use highly uncompetitive means to kill off all local domestic competition and then switch over to profit maximisation mode.
China has always been very good at stopping them from doing this, hence all the BS complaints by western companies about ‘unfair’ trade practices. They are just not used to a fair and effective regulator keeping their dirty tricks at bay.
Anyone who has actually been in China would know first hand just how much more dynamic, competitive and diversified the Chinese domestic market is. And correspondingly, the customer experience is leagues ahead of what you can expect in the west. That’s not what you get from uncompetitive crony capitalism. Ironically, it is the west that suffers much more for legalised crony capitalism.