The Chinese government has put the plan to make Shanghai a global financial center back on the table – and this time it might become a reality.
“I think the proposal is more realistic than it used to be because it focuses on the renminbi as a currency for reserve lending or money settlement for trade,” said Zhang Jun, director of the China Center for Economic Studies at Fudan University.
Change required
Using the renminbi as an international currency would mean that it would have to be fully convertible, and Beijing has already made some small steps in this direction. But more needs to be done before Shanghai can achieve its goal.
Zhang advocates encouraging Chinese banks to provide provide renminbi-based financial services to foreign companies overseas in order to boost the availability of the currency. Pan Yingli, a professor of finance at Shanghai Jiao Tong University, wants to see the establishment of a modern financial regulatory framework, better protection of investor rights and a relaxation of government controls.
Some analysts are skeptical as to the end goal, however. Independent economist Andy Xie stresses the decision to set up Shanghai as a financial center is driven by Beijing and the positive effects are meant to happen long before 2020. “They want to boost confidence and get people to buy property,” he said.
Property is a major part of the proposal, said Hingyin Lee, director of East China research and advisory services for Colliers International. The Shanghai government plans for financial services to be located in Huangpu district around the Bund, Lujiazui and the Zhangjiang High Tech Park in Pudong.
However, property sales from firms moving into those areas – and ultimately the benefits of Beijing’s 2020 plan as a whole – will not happen until more details are provided about the incentives offered to these firms.
