Shanghai seen as China's top financial centre in long term
Toh Han Shih
Although Shanghai has dropped plans to be an offshore yuan trading hub, the race to overtake Hong Kong as China's top international financial centre is far from over.
Shanghai Vice-Mayor Tu Guangshao announced this week that it would focus on being an onshore yuan trading centre, leaving Hong Kong to remain the dominant hub for offshore trading of the currency.
Shanghai Communist Party chief Yu Zhengsheng conceded Shanghai would not catch up with Hong Kong until 2020. However, the ambitions of the mainland's richest city run deep.
Tu was a co-author of an influential report advocating Shanghai, not Hong Kong, should be China's premier international financial centre in the long run.
The report recommended measures to make Shanghai a top international financial centre by 2020, a policy adopted by the State Council in 2009.
'In the long run, it is impossible for China to have two international financial centres,' said the report by the Brookings-Tsinghua Centre for Public Policy, the Beijing branch of the US-based Brookings Institution. 'China will finally have only one financial centre and that is Shanghai.'
When the report was completed in May 2008, it was read by top leaders including Vice-President Xi Jinping, Vice-Premier Wang Qishan and Yu, said Xiao Geng, the report's main editor and the former director of the Brookings-Tsinghua Centre.
It is not known if Tu supported the statement that Shanghai, not Hong Kong, would be China's leading international financial centre, as that was not the unanimous opinion of all 22 co-authors, clarified Xiao, now the director of the Columbia University Global Centre in East Asia.
The report was the result of a meeting in a hotel in Beijing on September 22, 2007, attended by most of the co-authors.
'At that meeting, most people, especially most of the foreign participants, think in 20 years China will have only one leading international financial centre, and that is Shanghai, not Hong Kong. Given the size of Shanghai's economy, the expected reforms in China, it was the dominant view at that meeting,' Xiao said.
'The New York Stock Exchange has shown much interest in the Shanghai Stock Exchange,' the report said.
'They think Hong Kong is not like Shanghai, for it is only a regional market. Overall, in foreigners' eyes, Hong Kong is only part of China.
'Anyone having long-term strategic vision would say China's financial centre will be in Shanghai. It represents how the world looks at China.'
The report's co-authors include senior mainland officials such as People's Bank of China governor Zhou Xiaochuan and Yi Gang, director of the State Administration of Foreign Exchange and deputy governor of the central bank.
The report also had influential foreign co-authors including John Thornton, chairman of the Brookings Institution and a former Goldman Sachs Asia chief.
Its recommendations include making the yuan fully convertible within a decade, one prerequisite that would have enabled Shanghai to be an offshore yuan centre.