China is not the only egg in the basket

It should draw the attention of those throwing large amounts of cash at buying stakes in Chinese banks to the fact that they should not put all their eggs in one emerging market basket.

At times it looks as if the market is becoming obsessed with the world's most populous country, while taking its eye off what is happening in other emerging markets that are, for the moment, far more lucrative. After all, the renminbi is not yet convertible, it is closely pegged to the dollar, and changes to the rigid Chinese currency regime happen at a snail's pace.

The current fashion for China-watching is obviously there for a reason. It is a huge economic powerhouse whose decisions can make or break the world economy. When the currency finally does become freely traded, it will be one of the most important, and could quickly surpass the yen in this respect.

However, this is not likely to happen in the imminent future. Even if the notoriously slow-moving Chinese authorities had a dramatic change of heart and decided to usher in a new era of fiscal freedom, the infrastructure is simply not in place to deliver a freely traded currency.

While we wait for the ultra-conservative Chinese government to decide upon the right time to bring currency flexibility, attention should be devoted to the plentiful opportunities to take advantage of rapidly evolving economies elsewhere.

India is a good example of this. While its economy is relatively small, it is possible now to make headway in a market that is sure to grow just as rapidly as others. Just last month, the government announced plans to introduce full convertibility of the current account, enabling foreign diect investment to occur much more easily and for Indians to invest overseas.

India was the second-fastest growing economy in the world last year behind China, and that growth can be harnessed now. Banks should be less blinkered about opportunities around the world. If foreign banks devoted a fraction of the attention to India and other open and fast-developing emerging markets they do to China they would see the benefit in the bottom line far more rapidly than they will from the significant investments they have piled into what is, for now, a Chinese pipe dream.