Will the dealmakers go to Shanghai's financial centre?
International financial executives will need good reasons to travel to Shanghai, with Beijing already a more important destination for them
How can Shanghai get ready to be a financial centre by 2020? We've talked about world-class infrastructure, freedom of capital flows, and of course the rule of law. But are we missing a basic requirement - people?
I am not just talking about how experienced financial industry workers can turn the small town of Lujiazui in Shanghai, China's so-called Wall Street, into a true international financial centre. I am more interested in the inflow of dealmakers and financial industry stakeholders from all over the world.
If you work in the financial industry, especially in the investment banking and private equity sectors, you may agree with me that there is not much need to travel to Shanghai from Hong Kong, London, or New York, where you may be based for certain business. You may travel more frequently to Beijing, however, where you can meet senior decision-makers and all the regulators for this or that kind of negotiation and/or to obtain business approvals.
Nowadays many Hong Kong-based private equity dealmakers and investment bankers often spend Tuesdays to Fridays on the mainland for business meetings with clients and officials. They usually go back to Hong Kong on Friday evening to spend time with their families, and then Monday is typically the day that many financial corporate executives get together for internal weekly meetings. Then on Tuesday they fly out again.
I met a senior banker from a major American bank for lunch last week and he talked about the people phenomenon I noted above. He is a busy traveller, but he only travels to Shanghai a couple of times a year.
"I go to Beijing to meet regulators and policymakers and almost all the biggest state-owned enterprises are headquartered in Beijing. Then I go to the southern or eastern parts of China to meet potential clients in the private sector," he said.
The banker mentioned Baosteel as an exception. The steelmaker, listed in Shanghai, has been rumoured to be considering a New York or Hong Kong listing for many years.
In the old days, all the top bosses from Wall Street banks would be happy to visit Shanghai-based Baosteel once a year at least, but their interest faded quickly due largely to Baosteel's hesitance about going abroad for a listing amid growing market uncertainties outside the mainland.
Talking of IPOs, have you ever heard someone telling you they are going to Shanghai for an IPO roadshow?
These days, more people are willing to do IPO roadshows in Singapore or Malaysia to meet the local tycoons. Of course there are a lot of rich people in Shanghai too, but many are perhaps already foreign passport holders and it's after all not easy for them to get their money out of the city or the country. So what's the point of doing an IPO roadshow in Shanghai?
With the launch of the free-trade zone in Shanghai, which aims to free-up foreign exchange controls, raising hopes for the international stock board there, we may see more frequent flows of people into the city. When you see that happen, you will know that the financial centre dream is not so far away.
But now? Not yet.
George Chen is the Post's financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. Like it? Visit facebook.com/mrshangkong