London's belated courting of Chinese banks will pay off

Britain's Chancellor of the Exchequer George Osborne blundered when he claimed recently that 160 million Chinese watched the popular British period television drama .

But the minister, on a trade mission to China with London Mayor Boris Johnson, was right to say the perception of China as simply a "sweatshop" was outdated: "This is a country that is right at the forefront of medicine and hi-tech and computing and hi-tech engineering and all of that. It is a very rapidly changing country."

Waking up to the fact that mainlanders are now the world's most valuable tourists who last year spent US$102 billion during their overseas travels, Osborne announced that new measures would make it easier for tens of thousands of Chinese tourists to obtain visas to visit the UK. In addition, Chinese businessmen will now be able to apply for "super priority" visas that are processed within 24 hours.

And, speaking in Beijing, the chancellor said: "A great nation like China should have a global currency." It should seek to develop the renminbi "through the international centre of finance, London", he added.

In a column on these pages last December, I warned that measures introduced by Britain's Prudential Regulation Authority preventing Chinese banks from opening branches in the UK were likely to backfire. The measures "could drive banks to withdraw from Britain's capital," I said, which would undermine London's ambition of building on its position as a major centre for trading in the renminbi.

I was proved right. Within a few weeks, China's three biggest banks had all switched their European headquarters to Luxembourg.