Shanghai among top financial hubs in world

NEW YORK (XINHUA) – Shanghai is expected to play an increasingly important role as a financial centre thanks to China’s commitment to and efforts in the continuous reform and opening up, experts have said.

According to the yearly Global Financial Centres Index reports by Z/Yen, a commercial think-tank in London, Shanghai has become the fourth most competitive financial centre in the world following New York, London and Tokyo in early 2020. It ranked 24th in 2013.

Aiming to become both an international financial centre and an international shipping centre by 2020, Shanghai’s ranking as a financial centre moved up significantly.

Shanghai has a lot of potential to be a major international financial centre for similar reasons why New York is, said Museum of American Finance Chairman Richard Sylla in a recent interview with Xinhua.

The economic foundation there for a financial centre is very large, said Sylla, who is also professor emeritus of economics at the Leonard N Stern School of Business of New York University.

“China’s economy is very big. So Shanghai will become a major financial centre. It just seems like Shanghai is bound to become a financial centre,” said Sylla, who specialises in the history of financial institutions and markets.

Horizon Financial Chief Economist Kevin Chen has made an even bolder assertion that Shanghai could be the most important financial centre in Asia in addition to its status as a financial centre in China.

Shanghai should have a parallel role with New York and London in terms of global trading of financial products, asset allocation, investment banking, insurance and other business, Chen told Xinhua recently. “I think this is beyond doubt,” he said.

Shanghai will continue to be a very important fund-raising centre to support the growth of Chinese companies and it is also pivotal to the institutionalisation and globalisation of China’s capital market, said UBS Securities Co, Ltd Chairman Eugene Qian.

“We continue to see international financial institutions, such as asset managers, banks and insurance companies, invest in China, and a large number of those are headquartered in Shanghai. Undoubtedly, Shanghai is an important gateway to China for global investors,” Qian told Xinhua.

“I assume that it would play a larger and larger role because of the Chinese economy’s importance to the Pacific region and the world economy,” said Sylla.

Shanghai has made very fast progress in building itself into a financial centre and the successful launch of crude oil futures by Shanghai International Energy Exchange serves as a landmark, said Chen.

With balanced price levels and big trading volumes, Shanghai crude oil futures have become the third most important benchmark in the world following New York crude oil futures and Brent crude oil futures, according to Chen.

The last 10 years can be seen as the golden decade of reform and opening up for China’s financial market, in which Shanghai has played a key role, said Qian.

China’s further liberalisation of the financial market is attracting big-name international financial firms from both Europe and the United States (US), with Shanghai as a magnet.

J P Morgan Securities (China) Co Ltd was formally opened for business in March and J P Morgan now is working to acquire more shares in the joint venture.

The world’s largest hedge fund Bridgewater Associates also set up an investment management unit in Shanghai with US asset management firm Vanguard recently announcing the relocation of regional headquarters to Shanghai.

Now, the Wall Street firms are looking for long term opportunities and that is why they are very heavily invested in China, said Chen.

Qian sees the launch of Shanghai Stock Exchange (SSE) STAR Market (Science and Technology Innovation Board), which adopts the IPO registration system, as a good example of institutionalisation and globalisation of China’s capital market.

The expansion of Wall Street firms in China results from China’s early recovery from the COVID-19 pandemic, growth potential of bond and stocks market, and its opening up policies, according to Qian.

“Coupled with the opening up policies in recent years, the trend for foreign financial companies coming to China is expected to continue,” said Qian. UBS AG, which is bullish about Chinese market potential on asset management and securities in the coming years, acquired two minority stakes of joint venture UBS Securities Co, Ltd at the end of 2018 and raised its shareholding to 51 per cent in the company.

Chen said China represents one of the best investment opportunities in the world and investors are still “very, very excited about opportunities in China”.

The American and Chinese businessmen get along pretty well and bilateral cooperation is mutually beneficial, according to Sylla.

As further reforms progress, Shanghai’s A-share market including the SSE STAR Market will become a popular listing venue for the secondary listing of China’s American depositary receipts (ADRs), according to Qian.