Up to now we have had it too easy. In the UK we have been busy investing overseas, no doubt with the expectation of big rewards, while we borrow from abroad at rock bottom interest rates.

In short, we have been using cheap credit to buy ourselves some tasty investments. This strategy has helped keep the pound up and has kept the UK economy afloat, when under normal circumstances we would have been suffocated by our debt.

According to the National Institute of Economics and Social Research, by the end of this year our balance of payments deficit will be 3.1 per cent of GDP, and will be even worse next year. But our clever use of money, the way we have picked up overseas investments offering good returns (in part through using cheap credit from abroad) has helped keep the balance of payments deficit down.

If foreigners were as good at extracting value out of their UK investments, as we are at making the most of our overseas investments, then the deficit would be a lot higher and the pound would be under an awful lot of pressure to shadow the dollar downwards.

And right now, it appears it’s changing. China wants more for its money. It is no longer content with a return of a fistful of dollars on its investments. It wants a few dollars more than that. This is good for China and some of our companies, but for our balance of payments, things might get bad. Maybe downright ugly.

China has already invested in Barclays, and if the UK bank’s bid for ABM Amro had gone ahead, would have pumped in a lot more.

Now, evidence has emerged from the US that China’s social security fund is mooting investing into US private equity giants Carlyle, KKR and TPG.

The FT quoted Isaac Meng, an analyst with BNP Paribas in Beijing, as saying, “The Chinese government is hoping to do a better job in exporting its capital than the Japanese did in the 1980s.”

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