Shanghai has been urged to build itself into a hub serving the rising outbound investment needs of Chinese firms, potentially increasing rivalry with Hong Kong as both cities race to augment their status as financial centres.
The suggestion by Liu Xiaochun, vice-president of the Shanghai Finance Institute and a senior banker with three decades of experience, was made in mid-June at a closed-door meeting hosted by China Finance 40, a Beijing think tank comprising many top Chinese financial regulators, bankers and academics.
“Just as American multinationals expanded globally with New York as their financial anchor, China’s outbound firms face a phenomenon shaped by unique international circumstances, and cannot rely on financial centres in other countries,” said Liu, former head of Agricultural Bank of China’s Hong Kong branch and former president of Hangzhou-headquartered China Zheshang Bank, according to a transcript of his speech published last week.
“China has Hong Kong, a mature international financial centre with the flexibility to respond to market changes, but that is not enough to fully meet the special needs of Chinese companies’ outbound expansion. In this regard, Shanghai needs to play a role.”
Hong Kong, which has the Greater Bay Area at its doorstep, a mature common law system and free capital flows, has long prided itself on being a superconnector that assists Chinese companies in expanding internationally. This includes expansion to both Western countries and those taking part in the Beijing-led Belt and Road Initiative.
“To boost its standing as an international financial centre, Shanghai must demonstrate that role through support for outbound Chinese firms,” Liu said.
Behind Liu’s proposals is Shanghai’s ambition to make itself a global business hub. The city has the Yangtze River Delta at its back, more regional headquarters of multinational companies than any other mainland city and policy support from the central government.