Shanghai widens financial hub lead over Hong Kong as it closes in on Vision 2020 targets

Anyone who still thinks Hong Kong is guaranteed a role as China’s offshore financial hub better think again. The competitive threat from Shanghai’s rapidly developing financial sector is no longer a distant, futuristic threat.

As the year draws to a close, figures show Hong Kong falling further behind Shanghai, with more financing arranged through the mainland city. That threatens to derail the financial hub growth theme Hong Kong has ridden since the first wave of major H-share listings in the ’90s.

Shanghai’s “2020 Vision” to transform itself into an international financial hub, first unveiled in 2009, has been reaffirmed in the next five-year plan, for 2016 to 2020. The central and city governments want to make Shanghai a hub able to meet the funding needs of the Chinese economy and match the new global financing role accorded an internationalised yuan.

The central government wants to transform the domestic markets by cutting the red tape involved in domestic equity and debt financing, bolstering the percentage of funds raised through the equity and debt capital markets, and weaning China of its heavy reliance on bank financing.

Zheng Yang, the director in charge of the Shanghai Municipal Government Office for Financial Services, the city regulator cum policy think-tank tasked with propelling Shanghai to international financial hub status, says that at the current rate of development the city is on track to deliver by 2020.

“We have basically finished building the ecosystem needed,” Zheng said.