China steps in

This is the moment I’ve been waiting for – China moving in to the chaos and snapping up the giants of Western capitalism. Bloomberg reports that China Investment Corp. may be buying half of Morgan Stanley. The Gulf States got burned by using their sovereign wealth funds to take a chunk of Citibank when the bear market still had plenty to go. I suspected China would wait until the market bottomed, then move with a vengeance.

America is particularly allergic to Chinese deals – remember that kerfuffle over New York’s ports coming under Arab control a couple of years back? But things were liquid then. If it’s a Chinese takeover or a Lehmans-style collapse, what would America do? There is huge potential for cash-rich China to vastly extend its geopolitical reach through this financial crisis in the US and Europe. So it will be fascinating to see if any more Chinese buyers come out of the woodwork.