(Yicai) Dec. 15 -- Shanghai, as an international financial center strategically positioned by China's national strategy, has entered a critical stage of development from "scale expansion" to "functional upgrading" with the global monetary landscape undergoing profound restructuring that presents a historic window of opportunity for the internationalization of the Chinese yuan.

The core task for Shanghai is to build a first-class financial ecosystem that can effectively support the international use of the yuan, ensuring controllable risks, efficient pricing, and alignment with international rules. The competitiveness of this system directly impacts the resilience of China's financial security and the strength of its international discourse power.

Shanghai has laid a solid foundation for building a globally competitive financial ecosystem, but it still faces critical shortcomings, with still room for improvement in market connectivity, financial product innovation, and cross-border service facilitation. Therefore, it must show wisdom and determination, draw on the ecosystem development experiences of mature markets, and leverage relevant policies to carry out a systematic financial ecosystem restructuring.

There are three major directions for optimizing Shanghai's financial ecosystem. First is enhancing the convenience and service efficiency of cross-border capital flows, with the current room for improvement in this area directly affecting the depth of foreign investment participation. The cross-border settlement processes of some multinational firms are cumbersome and time-consuming, lagging significantly behind global financial centers like Singapore, so optimizing processes and improving efficiency have become a top priority.

Second is to deepen market functions and enrich risk management tools. The "species diversity" of Shanghai's financial market is insufficient, and the development of yuan-denominated international derivatives lags, making it difficult to meet the risk hedging demands of global investors and hindering the building of the city into a global asset pricing center. The advanced derivative systems of mature markets such as London and Singapore provide valuable references for Shanghai.

Third is to promote institutional opening-up and enhance the international competitiveness of the business environment. Shanghai still has room for improvement in areas such as tax policy competitiveness and the adaptability of the legal environment, which directly impacts the aggregation of global high-end financial resources. The case of the Dubai International Financial Center, which gathered resources through precise institutional design, shows the significant value of institutional innovation.

To break through, it is necessary to take a long-term perspective and proceed step by step. In the short term, efforts can be focused on pilot areas such as the Lingang Special Area, simplifying the cross-border payment and settlement processes for high-quality companies and leveraging technology to enhance precise supervision.

In the medium term, it is important to deepen the innovation of yuan derivatives in areas such as staple commodities and interest rates, and explore offshore financial services. In the long term, it is necessary to improve the internationalized financial legal system and optimize tax and talent support policies.

Building Shanghai into a global financial center is not replicating models from other countries, but aims to create a core hub that caters to the demands of the Chinese market and connects the world. Only by upgrading the financial ecosystem can the city inject a strong impetus into the internationalization of the yuan and help China seize the strategic initiative in the reconstruction of the global monetary landscape.

The author of this article is Jing Jianguo, director of the Shanghai Chief Economist Financial Development Center's Offshore Finance Research Institute and an expert at the Shanghai Financial Association.

Editor: Martin Kadiev