The Shanghai municipal government has issued a new policy outline to advance its ambitions of becoming a “globally influential international financial centre” by 2035.
“By 2025 Shanghai’s international financial centre level will markedly increase, further bringing into prominence its role in servicing the high-quality growth of the national economy,” said the “Shanghai International Financial Centre Development ’14th Five Year Plan'” (上海国际金融中心建设“十四五”规划) released by the municipal government on 24 August.
“Shanghai’s status as a centre for the allocation of renminbi financial assets and risk management will be further consolidated and its role in global resource allocation will markedly strengthen, setting firm foundations for Shanghai to become an international financial centre wielding major global influence by 2035.”
Wu Qing (吴清), Shanghai deputy-mayor, said at a press conference on 24 August that the Plan would place heavy emphasis on the “five directions” of “internationalisation, marketisation, digitisation, green transformation and the rule of law.”
The Plan outlines the “one overall goal” of Shanghai’s transformation into an internationally influential financial centre by 2035, alongside the “six specific goals” that are referred to as the “two centres, the two hubs and the two high grounds.”
These six specific goals encompass the transformation of Shanghai into:
- A global asset management centre that better satisfies the asset allocation and risk management needs of domestic and overseas investors.
- A fintech centre that is more globally competitive, and drives the digital transformation of the city.
- An international green finance hub, which further drives the green development of the Chinese economy.
- A renminbi cross-border usage hub, for marked expansion of the international influence of “Shanghai prices.”
- An international financial talent high ground, with continuing growth in the innovative capabilities of local financial personnel.
- A financial commercial environment high ground.
The Plan sets out an indices system comprised of seven predictive indices, including financial market scale, direct financing capability, financial openness and fintech development.
The Plan also flags a much greater role for Shanghai when it comes to cross-border usage of the Renminbi and capital account liberalisation.
Sun Hui (孙辉), deputy-chair of the Shanghai branch of the Chinese central bank, said that during the 14th Five Year Plan it would adopt the following measures to drive more free usage of the renminbi:
- “Major breakthroughs” in the cross-border usage of the renminbi in key areas and by key actors, pointing in particular to areas including crude oil, iron ore, grain, rubber, as well as offshore outsourcing projects.
- Optimisation of the commercial environment, and driving the implementation of the concept that “the local currency is prioritised.” The creation of a renminbi cross-border usage policy system with “clear rules, standardised terms, complete systems and strong operability.” Implementation of the principle that “the renminbi can do everything that foreign exchange can do, and is more convenient.”
- Effectively employing the free trade zone and Lingang new area as pilot zones, and driving high-level opening of systems.
- Upholding the direction of marketisation, upholding the increased convenience of servicing of investment and trade, and continual strengthening of the foundations for cross-border renminbi usage.
- Strengthening the implementation of monetary policy transmission, smoothing out implementation of policy to “the last mile,” and further raising the sense of convenience of market actors in using the renminbi.
“During the process of internationalisation of the renminbi, more and more non-resident investors will favour renminbi assets, and Shanghai’s status as a renminbi asset allocation and risk management centre will be consolidated,” said Li Feng (李峰), finance professor at Shanghai Jiaotong University and deputy-chair of the China Financial Research Institute, to state-owned media.
“Looking at the level of internationalisation of the financial market, because the capital account isn’t fully convertible, the level of globalisation of the asset allocations of Chinese residents is quite low, and the share of investments by overseas investors in China is also very low – until now there have not yet been any offshore companies that have listed on the Chinese A-share market.
“The free usage of the renminbi and capital account convertibility trials will help to raise the internationalisation of China’s financial markets, and have major significance for achieving the creation of a centre for the allocation of renminbi financial assets.”