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Higher-level financial opening-up measures to land in Shanghai

February 20, 2020


Abstract : Despite the outbreak of novel coronavirus pneumonia, China's efforts of building Shanghai into an international financial center has not slowed down. China's financial authorities have recently issued a guideline to further accelerate the process.

BEIJING, Feb. 20 (Xinhua) -- Despite the outbreak of novel coronavirus pneumonia, China's efforts of building Shanghai into an international financial center has not slowed down. China's financial authorities have recently issued a guideline to further accelerate the process and better support the integrated development of the Yangtze River Delta.

Jointly issued by the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange and the Shanghai municipal government, the guideline proposes to launch a series of innovative measures in Shanghai, the pacesetter of the financial opening-up in China.

-- Higher level of opening-up

After years of development, Shanghai has become the region with the largest number of foreign financial institutions in China. By the end of 2019, more than 510 foreign financial institutions settled in Shanghai.

Since 2018, Shanghai has reported 48 opening-up projects in five batches to national financial administrations, covering banks, securities, funds, insurance, asset management, and other areas. A number of landmark pioneer projects have completed construction.

Now, the newly-issued guideline will further push forward Shanghai's pilot role in China, by supporting higher-level financial opening-up measures to be implemented first in the city.

In general, the measures can be divided into three parts.

The first is to support foreign capitals to set up joint-venture wealth management companies, establish or hold securities and futures operating institutions, as well as pension management companies in Shanghai. Also, the country will support multinational companies set up global or regional fund management centers and other headquarters-type institutions in Shanghai, and facilitate foreign-controlled fund management centers in Shanghai to conduct transactions in the interbank foreign exchange market.

The second is to construct Shanghai into a center for RMB asset allocation and risk management. Besides constant efforts in improving cross-border investment facilitation, the city will accelerate the development of the RMB interest rate market and foreign exchange derivatives market, including developing the interest rate options for yuan.

The third is to further foster a high-quality financial business environment in Shanghai in line with international standards, which is crucial to enhance the city's international competitiveness.

-- Two starting points of innovation

As the two windows of Shanghai's internal and external reform and opening-up, the integration of the Lingang New Area and the Yangtze River Delta has also become the two starting points for implementation of the innovative measures proposed by the guidelines.

In the opinion of He Haifeng, director of the Institute of Financial Policy at the Chinese Academy of Social Sciences (CASS), there are substantial breakthroughs in financial innovation in the guideline, mainly concerning industry access, policy coordination and information sharing.

The construction of Lingang New Area needs a large amount of long-term and stable funds. In view of that, the guideline creatively proposes commercial banks' wealth management subsidiaries and financial asset investment companies to jointly set up professional subsidiaries in Shanghai. This kind of subsidiaries can invest in key construction projects, as well as participate in restructuring, equity investment, direct investment and other businesses in related enterprises, so as to better support the development of the area's key industries with international competitive potential, such as integrated circuits, artificial intelligence, biomedicine, aerospace, etc.

The guideline also aims at deepening the liberalization and facilitation of investment and trade in Shanghai, on the basis of the financial reform of the Shanghai Pilot Free Trade Zone at the early stage.

"This will keep the financial policy of the new area always at the leading level in the country, increase long-term confidence in the market, and boost the enthusiasm of domestic and foreign investors for participating in the construction of the new area," an official with the Shanghai Financial Regulatory Bureau said, adding that the current management committee of the new area is actively attracting financial institutions such as joint-venture wealth management companies to settle in.

Targeting the difficulties of the financial integration of the Yangtze River Delta, the guideline promotes cross-regional cooperation between financial institutions, such as exploring the joint credit granting across the Yangtze River Delta to promote the rational flow of credit resources in the region. He Haifeng said that this was a relatively rare move in the past in the banking industry, and it will improve the financial service for the Yangtze River Delta's real economy and ensure coordinated regional development. In addition, the proposed establishment of an information sharing mechanism will provide more powerful support for regulators to formulate policies and prevent risks.

-- Pressing mission

According to an action plan launched early last year by China's top authorities, Shanghai is planned to basically become an international financial center in 2020.

Currently, the whole country is at a critical moment of winning the battle of the epidemic prevention and control, as well as achieving economic and social development goals.

"The issuance of the guideline is very timely and necessary," said Yan Hong, deputy dean of Shanghai Advanced Institute of Finance (SAIF), Shanghai Jiaotong University. He explained that attracting international enterprises to participate in building Shanghai into an international financial center through further financial opening-up, will make China's development more closely integrated with the global economy.

An official with the Shanghai Financial Regulatory Bureau said that the guideline is the first document of this year released by Chinese government authorities on supporting the construction of the Shanghai International Financial Center, as well as the first this year to implement the outline of the integrated regional development of the Yangtze River Delta. It is therefore a very important mobilization order to be carried out.

The speedy implementation of the guideline is not only conducive to Shanghai, but also can accumulate more valuable experience that can be replicated and promoted for the financial reform and opening-up, and innovative development in the whole country, commented He Haifeng. (Edited by Li Wenxin, liwenxin@xinhua.org)


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