Shanghai pioneered in global financial innovation
The top 10 events of 2014 in building the Shanghai international financial center were unveiled on December 28. With a series of refreshing financial innovations and increasing degree of internationalization, Shanghai continued to improve environment and institutional guarantee for financial development and appeared on the global financial territory in a brand-new demeanor.
Vanguard of financial innovation
A raft of financial innovation has been introduced in the China (Shanghai) Pilot Free trade zone, the testing ground of the country’s financial reforms. They include cross-border yuan settlement for e-commerce, two-way cross-border yuan cash pooling, centralized operation and management of foreign-exchange funds of multinational corporations, cross-border yuan loan, equity financing and cross-border mergers and acquisitions and the registration system for cross-border equity investment by enterprises.
They have been beneficial to enterprises. It is estimated that the financial innovations could help enterprises reduce costs by as mush as 20 percent.
In the past year, financial institutional reform to promote convertibility under capital account and financial service opening up run smoothly in the zone, according to Zhu Min, deputy director of the management committee of the zone. As of October 2014, cross-border yuan settlements in the zone have totaled 227.9 billion yuan. Funds worth more than 49 billion yuan have been transferred through cash pooling. Cross-border yuan loans have amounted 19 billion yuan. The construction of the free trade account system, an important infrastructure for financial innovation in the zone, will be the priority of the current and next phrase of financial innovation in the zone.
Bridgehead of China’s financial internationalization
Shanghai that is striving to become an international financial center is the frontier of China’s financial reform. Last year, the New Development Bank of the BRICS group was settled in Shanghai, the international board of the Shanghai Gold Exchange was launched, the Shanghai-Hong Kong Stock Connect kicked off and the trading of crude oil futures was approved. The internalization of China’s financial industry started from Shanghai.
On November, the much-anticipated Shanghai-Hong Kong Stock Connect was official launched. In the 20 trading days as of December 12, the average daily turnover under the connect was 5.84 billion yuan. It is expected that more and more foreign funds will choose the stock connect to invest in mainland’s capital market. Lin Caiyi, chief economist with Guotai Junan Securities said the stock connect will accelerate Shanghai’s pace to become an international financial center.
On December 18, China Minsheng Investment Co Ltd reached a cooperation agreement with Sailing Capital to set up sub-funds and deepen cooperation in cross-border yuan investment. Shao Yaliang, chairman of Sailing Capital, said the cooperation of China Minsheng Investment and Sailing Capital will make them bellwether in providing financial services to the real economy and in the integration of industrial capital and financial capital.
In August 2014, the first overseas deal of Sailing Capital achieved 5 times return on investment after Mobileye, the Israel-based development company of advanced driver assistance system, went public on the New York Stock Exchange.
“Internationalization has become an important label of Shanghai on the city’s journey to become an international financial center. Going out enables Shanghai financial firms to be familiar with the language and the rules of the game of the international markets and offers them platforms to have conversation with international clients and foreign investment banks, making Shanghai a foregoer and bellwether in China’s financial internationalization,” said Kong Qingwei, Party Secretary of the Shanghai Finance Committee.
Shanghai’s attractiveness
According to 2014 Xinhua-Dow Jones International Financial Centers Development Index, Shanghai was among the global leading financial centers for the first time and tied with Hong Kong for the fifth place as a world financial center. It’s more praiseworthy that Shanghai keeps improving policy measure and system, deepening credit system construction, and improving services quality to create a more international, market-oriented and legal-based environment for the gathering of all kinds of financial markets.
Since 2014, Shanghai introduced a series of policies to promote the healthy development of the capital market, modern insurance services, Internet finance and culture and finance. The city’s favorable environment has lured various financial institutions. China Minsheng Investment Co Ltd settled in Shanghai, Shanghai Huarui Bank, the city’s first private bank, was approved to set up and Shanghai Life Insurance Co Ltd was approved to set up in the city’s pilot free trade zone.
“Environment is an important basis for the development of financial industry and even the construction of Shanghai international financial center, including talent environment, law enforcement environment and credit environment. Shanghai government will continue to streamline administration, decentralize power and improve efficiency to create a better environment for financial development. Shanghai will pay more attention to the construction of legal and credit environment for financial industry and offer more positive energy to entrepreneurship and innovation. Shanghai will accelerate the implementation of financial talent strategy to attract all kinds of talents and create better condition for talents to play their role,” said Shanghai Vice Mayor Tu Guangshao.