The deal announced yesterday in which the RBS will lead a consortium to buy a 10 percent stake in Bank of China would have been inconceivable only a few years ago. China's banks were arcane and inefficient beyond belief, forced by government to carry billions of bad debts and to support loss-making state enterprises. Since then, as Caroline Merrell (Times) tells us,

The tide has turned since the authorities cleaned up the main banks through a capital injection of £40 billion in 2003 and the transfer of £144 billion of bad debt from the banks' balance sheets to debt disposal companies.

It is a relatively small investment by RBS, but it gives them a seat on the board and access to a bank with 11,307 branches in mainland China, and 14 per cent of the country’s savings market. Bank of China, one of the most outward looking, is on line for a flotation further down the road. Obviously this gives RBS a toe-hold in China's surging economy, and brings China further into the international financial community. More than that, it shows that the Chinese are becoming quite good at capitalism.