Hong Kong, as the freest economy in the world, is an ideal place for global capital to enter the mainland. With the further opening of China’s capital account, Shanghai could one day outshine Hong Kong, but only if property rights are protected under the rule of law understood as a meta-legal principle whereby all individuals are guided by what F. A Hayek called “rules of just conduct.”
In all of our excitement about what this might mean for the finance industry, let us keep in mind that there are as many good reasons for staying out of Chinese investments right now than there are for getting in.
Volatility play looks promising.