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Shanghai's Ambition: Aligning Financial Growth with High Quality Development in China

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Shangh’s Ambition to Become an International Financial Hub: Aligning with High-Quality Growth

Developed as part of China's strategic economic plan, establishing Shangh as a global financial center serves multiple purposes. It is central not only to the prosperity of the Yangtze River Delta region but also reflects Beijing's efforts towards promoting market reforms and fostering high-quality growth. The recently released 30-point reform directive emphasizes strengthening Shangh's role as the premier city for international finance in China.

This guideline, unveiled on February 14th, underscores Shangh’s vision to match its economic strength with the status of the Chinese yuan in the global economy. The document outlines several concrete measures med at consolidating Shangh's position:

Streamlining capital account convertibility: The directive proposes developing an RMB-to-foreign currency capital pool for qualified foreign investors within the Lingang New Area, easing for allocating and adjusting their reserves in both currencies.

Boosting offshore renminbi utilization: The plan encourages entities based in the Lingang New Area to leverage cross-border transfers and the use of offshore yuan rsed through trade financing, foreign direct investment FDI, debt financing, and initial public offerings IPOs.

Growing the derivatives market: It advises enhancing interest rate derivative markets to facilitate risk management while improving pricing mechanisms for this key financial tool.

Welcoming foreign investors: The directive lays groundwork for foreign institutional investors and large banks to pilot wealth management joint ventures in Shangh. These entities will also be able to control securities and fund-management companies within the city.

Expanding insurance markets: Now, foreign institutional investors can establish pension management companies and wholly-owned life insurers in Shangh, marking a first-time opportunity for such operations in the city.

Participation in the interbank forex market: Non-financial groups are now allowed to set up financial holding companies in Shangh while participating in the interbank foreign exchange market. This follows the precedent set for foreign banks since January 2005.

These initiatives m to create a more attractive environment for foreign investors by leveraging Shangh's strengths as a finance-frily city. In tandem, efforts are being made to support China's technology sector:

  1. Introduction of existing technologies into financial sectors: The directive encourages cooperation between financial institutions and major tech enterprises in establishing FinTech firms within the Lingang New Area. These ventures are expected to pioneer big data, cloud computing, and blockchn innovations designed for financial use.

  2. Financing for domestic technological innovation: Financial institutions and insurance companies will provide long-term credit extensions, investment funds, direct investments, and other forms of support f-related research projects in Shangh. Qualified tech companies will have access to the STAR Market for initial public offerings IPOs, ensuring sufficient funding for new technology development.

By focusing on both finance sector advancement and technological innovation, China position Shangh at the forefront of its future growth strategy. This initiative underscores Beijing's commitment to transforming Shangh into an international financial hub while mntning a balanced relationship between government intervention and market dynamics, as well as domestic versus global market conditions.


References:

  1. Infographic Deep Dive Into Deep Tech Investing. Boston Consulting Group BCG. 2019. www.bcg.compublications2019infographic-deep-dive-into-deep-tech-investing.aspxhttp:

  2. Dawn of the Deep Tech Ecosystem. Boston Consulting Group BCG. 2019. www.bcg.compublications2019dawn-deep-tech-ecosystem.aspxhttp:


The reform initiative to elevate Shangh as a global finance center aligns with China's ambitions for its financial market development, increased access to capital f innovation, and fostering a competitive economy through refined market conditions.


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