http://www.nytimes.com/2014/11/11/business/china-moves-to-open-economic-links.html 2014-11-10 08:37:07 China Moves to Open Economic Links A jump in the value of the renminbi and the authorization of a share trading program between Hong Kong and Shanghai come as Beijing hosts the APEC summit. === HONG KONG — The Chinese government announced on Monday morning the sharpest single-day jump in the value of the renminbi in more than four years and the authorization of a share trading program between Hong Kong and Shanghai, two moves at the start of a summit in Beijing aimed at liberalizing China’s financial links with the rest of the world. The two initiatives came a day after President Xi Jinping of China also announced a separate initiative to contribute $40 billion for a Silk Road fund that would build infrastructure and develop natural resources in China’s neighbors, although he provided few details on how the fund would work. The timing of the sharp rise in the Chinese currency, just as President Obama arrived in Beijing for the Asia-Pacific Economic Cooperation summit, represented an olive branch of sorts not just to the United States, which has pressed for years for Beijing to allow a stronger Chinese currency, but also to other Asian heads of state arriving for the summit. China has emerged as the largest trading partner for many countries in the region, as well as the world’s second-largest economy. A stronger renminbi would help the exports of other economies in the region — although the benefits may be limited for countries like Australia that export mostly commodities like iron ore, which is priced in dollars. China’s renminbi strengthened on Monday after the People’s Bank of China raised its morning fix of the currency’s value by 0.37 percent, to 6.1377 renminbi to the United States dollar. It was the largest single-day increase in the renminbi’s value since June 22, 2010, when the renminbi jumped 0.43 percent after the government scrapped an informal peg to the dollar that had been put in place during the global financial crisis. Economists said that the timing of the currency move showed a clear political agenda, as many Asian leaders want to expand exports to China, said Li Kui-Wai, an economist at the City University of Hong Kong who is a former director of the university’s APEC Studies Center. “It’s a giveaway at APEC, in the sense that China wants good relations moneywise with other APEC members,” Mr. Li said. “In the long run, it’s not much — it’s a gesture; they can give away a bit to please other APEC members.” The unexpected increase comes two days after China announced a near-record trade surplus for October of $45.4 billion. That trade surplus gives China’s economic policy makers the political cover they may need in dealing with likely objections from the country’s powerful and politically influential export sector. Chinese exporters have long lobbied for a weak currency to make their products more competitive in foreign markets, helping China capture an ever rising share of global trade. Dariusz Kowalczyk, a senior economist and strategist at Crédit Agricole, said that the willingness of the People’s Bank of China, the country’s central bank, to authorize such a sizable jump in the value of the currency partly represented a response to China’s persistently large trade surpluses. “It sends a clear signal that the central bank wants a stronger currency,” he said. Regulators in Hong Kong and China separately announced that both the Hong Kong and Shanghai bourses would begin a trading link on Nov. 17, in what has been considered the boldest move yet by the Chinese government to open its equity markets to international investors. The stock linkup, which had been unexpectedly delayed for several weeks as protesters occupied downtown avenues in Hong Kong, will allow foreign investors to trade stocks listed on the Shanghai stock exchange directly for the first time. Mainland investors will be able to trade the shares of companies listed in Hong Kong. “The launch of the H.K.-Shanghai Connect program is a milestone in the evolution of China’s financial sector and the opening of its capital markets,” said Shane Gunther, a head of equities at UBS, adding that it would give investors access to a market in China that is worth $3.9 trillion. The news gave a lift to stocks in Shanghai, where the Shanghai Composite index rose 1.5 percent, and in Hong Kong, where the Hang Seng gained 1.7 percent. The linkup between the two exchanges, meanwhile, has been closely watched by the financial community here and around the world. The project was originally announced by the Chinese premier Li Keqiang in April and was expected to launch at the end of October. However, the launch was delayed with little explanation, prompting speculation that the plans were no longer on the table and that pro-democracy demonstrations that have gripped Hong Kong for weeks were a factor in the delay. Speaking days after the exchange project failed to launch, Ashley Alder, the head of Hong Kong Securities and Futures Commission, said his agency had made the necessary preparations for the scheme, indicating that the delays were coming from China. “The tunnel has been built and the train needs to go through it,” he told an audience in Hong Kong at a Thomson Reuters regulatory conference. The program will be a boon to banks, brokerage firms and hedge funds, many of whom have been quietly building up their operations to take advantage of the program. On Monday, Mr. Gunther at UBS gave a nod to this, saying international and domestic clients were “seeking to board the through train.” While the two moves on Monday reflected China’s willingness to liberalize its markets, it also reflected a practical need on the part of the government, Julia Wang, an economist at HSBC, said. “There is a rising consensus that the yuan is trading close to equilibrium,” Ms. Wang said. “So the government’s decision to pursue more channels for capital to go out reflects the need to increase the amount of outflows,” she added.