Shanghai set for global financial center status

Major plan by central regulators calls for innovative, transparent system

Shanghai is taking major steps to seal its status as a global financial center, with central regulators laying out a specific action plan toward that goal.

With approval from the State Council, eight central regulatory bodies led by the People's Bank of China issued in late January the plan to develop Shanghai into an international financial hub. The move calls for the city to establish itself in the global financial market with prevailing renminbi products by 2020. A legal, innovative, highly efficient, transparent and open financial system will also be in place.

Shanghai Vice-Mayor Wu Qing said the city should focus on the development of major sectors - asset management, cross-border investment and financing, financial technology, insurance, renminbi asset pricing, payment and clearance, as well as financial risk management and stress testing.

"It has become a national strategy to build Shanghai into an international financial center and much progress has been made to that end," said Huang Xiaoguang, CEO of ANZ Bank China.

Although there is still much room for improvement to attain the goal, Shanghai will eventually grow into a global financial hub that is on par with London and New York, as China becomes stronger and the financial sector is further connected to the international market with the new round of opening-up, Huang said.

Shanghai Party secretary Li Qiang said at the Lujiazui Forum in June last year that finance is the "most active element" in Shanghai's development. The city has "strong financial DNA" and shown unique advantages in the financial industry. While China needs a strong financial system and a global financial center that is in line with the country's economic power and the renminbi's international standing, it is Shanghai's mission to shoulder the responsibility, he said.

Total trading volume in the Shanghai financial market exceeded 1,645 trillion yuan ($242 trillion) in 2018, up 15.2 percent from a year earlier, according to latest figures. There were 1,605 registered financial institutions in the city by 2018, among which 68 were registered last year. Nearly 30 percent of all the financial institutions were from overseas.

In 2018, a global financial centers index compiled by UK independent think tank Z/Yen showed that Shanghai ranked fifth among all international cities, or one position higher from that in 2017. While a large number of leading fintech companies have set up in neighboring city Hangzhou, capital of Zhejiang province, some of them are also moving or opening branches in Shanghai, given the latter's importance in the international financial industry. One of the best examples is e-commerce giant Alibaba's payment arm Alipay renting office spaces in Shanghai's Lujiazui area, said Meng Tian, deputy director of the fintech research institute at Shanghai University.

Shanghai's longtime advantages in the financial industry, including a talent pool in Lujiazui and close ties with international markets, provide the ideal environment for fintech startups, said LeGain Group president Wang Wei. Wang set up the fintech company in 2015 in the city.

"Even the local residents here have shown a deeper understanding of investment. They can accept diverse offers of financial products, which indicates more opportunities for startups," Wang said.

Investment in the development and retention of talent is crucial for financial institutions in Shanghai if they are to meet the city's long-standing financial ambitions, according to global recruitment specialist Hays.

In corporate banking, candidates for trade finance, global markets, security, services, custodian and operations positions are in high demand. Senior investment bankers with experience in A-share capital markets are also highly sought-after, with shareholding ratio limits for foreign investors in China being lifted in 2017, according to Hays.

While asset management and custody services for qualified foreign institutional investor and renminbi-qualified foreign institutional investor clients are on the rise, custodian banks are increasing their headcount for both front and back office roles, as Hays found out.

Apart from senior and mid-level positions, the recruitment firm suggested talent preparation at the junior level, as banks and financial institutions will demonstrate huge demand for junior candidates in relationship manager and sales roles.

Many foreign institutions have set up their regional headquarters in Shanghai since 2006, according to Simon Lance, managing director for Hays, Greater China. The gap concerning the gross annual remuneration packages among employees in Shanghai, Hong Kong and Singapore has narrowed, especially for front office roles.

However, due to high individual income taxes, there remains a noticeable difference in net annual income between Shanghai and its regional peers, Lance said.