(Yicai Global) June 24 -- Shanghai has been in an all-out sprint towards turning itself into an international financial center over the past few years and the Chinese megacity continues to open-up its capital markets and remain at the forefront of fintech and other innovations to retain its top global standing.
Shanghai has become a financial center worthy of its name in terms of transaction size, market type and the number of institutions involved, said Li Feng, deputy dean of the China Academy of Financial Research at Shanghai Jiaotong University and also a professor of accounting at the university’s Shanghai Advanced Institute of Finance.
Certainly its astounding growth is reflected in the data. The city’s financial market transaction volume jumped 84 percent to CNY2.5 quadrillion (USD373 trillion) last year from 2016. While the added value of the financial industry surged 63 percent to CNY797.3 billion (USD119 billion), accounting for 18.5 percent of Shanghai's economic output and the highest among Chinese cities.
The Shanghai Stock Exchange was the world’s third biggest initial public offering market last year in terms of the number of listings and funds raised, after the NASDAQ and New York stock exchange, and is the most active securities exchange worldwide.
The city ranks high in many global indexes. Shanghai has placed third in two straight editions of the Global Financial Centers Index compiled by Chinese and UK think tanks the China Development Institute and z/Yen in September 2020 and March 2021. And it came fourth in the latest ranking in March behind Hong Kong, London and New York.
As of the end of 2021, Shanghai was home to nearly 1,700 financial institutions, almost a third of which were foreign backed. This is up from 435 foreign-funded financial institutions in 2017, 87 of which were legal entities. And 17 of the world’s top 20 international asset management firms have set up a base in the megacity.
So far this year, four asset managers were approved to take part in the Qualified Foreign Limited Partner Pilot Project, a trial inbound investment scheme, according to the city’s Municipal Financial Regulatory Bureau. These are the US’ Hamilton Lane, China Construction Bank International, CDH Investments and Japan’s JAFCO Asia (Phase II). The US’ BlackRock and Italy’s Azimut Group have also been given the greenlight to take part in the Qualified Domestic Limited Partner Pilot Project, a trial outbound investment scheme.
Other international asset managers such as Guangdong Ruixin Investment, the US’ Pacific Investment Management and Switzerland’s Union Bancaire Privée remain optimistic about Shanghai’s future development despite the recent impact of the Covid-19 outbreaks, and have said they will apply for additional pilot quotas to expand their business in China.
In the Global Financial Centers Index, Shanghai ranked fifth in the investment management sub-index in March 2021, close on the heels of established asset management centers New York, London, Hong Kong and Singapore.
In 2020, the Shanghai government pledged to make the city a globally competitive fintech center within five years. To accomplish this, Shanghai needs to keep in step with the technology empowerment and digitalization trends transforming the global financial sector.
The city has been at the forefront of the central bank’s e-Yuan project and other fintech innovations. The People’s Bank of China’s digital currency research institute set up the Shanghai Financial Technology center recently. And last December Shanghai launched the China Securities Regulatory Commission capital market fintech innovation pilot.
“Both China and the US have invested a lot in fintech and achieved great success, with five of the top 10 fintech hubs coming from the US and four from China,” Li said, “Shanghai needs to maintain its advantages and keep up with the development of financial technology.”
Editor: Kim Taylor