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Guidelines to help city grow into financial hub
By Zhang Fengming |
March 27, 2009, Friday
|
Print Edition
Print Edition
CHINA'S State Council on Wednesday mapped out guidelines for Shanghai to step up building into a major international financial center and shipping hub by 2020.
Shanghai has been preparing to introduce more innovative financial policies for years, including using the yuan for trade settlement and tax breaks to encourage locals to buy pension products. The guidelines will allow Shanghai to be bold in implementing these moves.
"Shanghai will encourage innovation on a trial basis to improve the financial environment," said Xiao Lin, the deputy director of the city government's research department.
China began efforts to turn Shanghai into a financial hub in the 1990s. However, the city lacked concrete national-level backup, and few detailed policies were issued to help it make major breakthroughs. These guidelines should fill that need.
Shanghai is already China's financial hub, home to the country's largest stock market, its major futures market for metals and energy, its gold bourse and the foreign exchange center, while Pudong is emerging as the Chinese Wall Street.
However, the city is still lagging behind markets such as Wall Street and the City of London because of a lack of financial talent, an immature legal system and a lack of sophisticated investment products.
The city has been trying to attract more financial companies to set up offices in Shanghai, using municipal-level initiatives such as favorable tax policies and helping executives set themselves up in the city and find schools for their children.
Individual income tax is higher on the Chinese mainland than in surrounding financial hubs such as Singapore and Hong Kong, which makes Shanghai less attractive for financial professionals.
"What Shanghai lacks most is the soft power," said Sun Lijian, professor of finance and executive vice dean of the School of Economics at Fudan University.
Sun said improved government efficiency and a national understanding of financial risk and wealth accumulation will help shape Shanghai as a major financial hub.
More ideas include enabling overseas corporations to issue yuan bonds onshore, enabling overseas companies to issue yuan-backed shares, and encouraging the set-up of one-stop financial supermarkets ?? financial companies that offer banking, insurance and asset management under one umbrella.
The Shanghai Bureau of the China Insurance Regulatory Commission has started studying the feasibility of individual income tax extension periods on pension products. This would mean residents could defer their tax payments if they spend the money on pension products.
Yan Qingmin, head of the Shanghai Bureau of the China Banking Regulatory Commission, said yesterday the central government's target of making Shanghai a shipping center could play an important role in making Shanghai a global financial hub.
"In any financial hub, such as London, shipping and the financial industries feed into and strengthen each other," he said.
Key measures to support Shanghai's development as an international financial hub
1. Conduct trade settlement in yuan on a trial basis
2. Fully tap the financial market in Shanghai in terms of clearing in yuan
3. Develop over-the-counter markets for non-listed companies in the Yangtze River Delta region
4. Study a mechanism to help companies traded on the OTC markets to be transferred to the main stock boards
5. Develop pension products that offer tax breaks to encourage people to pay into pensions
6. Encourage more international development institutions to issue yuan-denominated bonds
7. Study plans to allow overseas enterprises to issue yuan-denominated bonds in China
8. Find a good time to allow qualified overseas companies to issue yuan-denominated shares
9. Step up development of the re-insurance market
10. Give priority in terms of business expansion to Sino-foreign securities and fund-management joint ventures
11. Encourage financial institutions to cover a full range of businesses
12. Encourage the development of private equity and venture capital companies
Shanghai has been preparing to introduce more innovative financial policies for years, including using the yuan for trade settlement and tax breaks to encourage locals to buy pension products. The guidelines will allow Shanghai to be bold in implementing these moves.
"Shanghai will encourage innovation on a trial basis to improve the financial environment," said Xiao Lin, the deputy director of the city government's research department.
China began efforts to turn Shanghai into a financial hub in the 1990s. However, the city lacked concrete national-level backup, and few detailed policies were issued to help it make major breakthroughs. These guidelines should fill that need.
Shanghai is already China's financial hub, home to the country's largest stock market, its major futures market for metals and energy, its gold bourse and the foreign exchange center, while Pudong is emerging as the Chinese Wall Street.
However, the city is still lagging behind markets such as Wall Street and the City of London because of a lack of financial talent, an immature legal system and a lack of sophisticated investment products.
The city has been trying to attract more financial companies to set up offices in Shanghai, using municipal-level initiatives such as favorable tax policies and helping executives set themselves up in the city and find schools for their children.
Individual income tax is higher on the Chinese mainland than in surrounding financial hubs such as Singapore and Hong Kong, which makes Shanghai less attractive for financial professionals.
"What Shanghai lacks most is the soft power," said Sun Lijian, professor of finance and executive vice dean of the School of Economics at Fudan University.
Sun said improved government efficiency and a national understanding of financial risk and wealth accumulation will help shape Shanghai as a major financial hub.
More ideas include enabling overseas corporations to issue yuan bonds onshore, enabling overseas companies to issue yuan-backed shares, and encouraging the set-up of one-stop financial supermarkets ?? financial companies that offer banking, insurance and asset management under one umbrella.
The Shanghai Bureau of the China Insurance Regulatory Commission has started studying the feasibility of individual income tax extension periods on pension products. This would mean residents could defer their tax payments if they spend the money on pension products.
Yan Qingmin, head of the Shanghai Bureau of the China Banking Regulatory Commission, said yesterday the central government's target of making Shanghai a shipping center could play an important role in making Shanghai a global financial hub.
"In any financial hub, such as London, shipping and the financial industries feed into and strengthen each other," he said.
Key measures to support Shanghai's development as an international financial hub
1. Conduct trade settlement in yuan on a trial basis
2. Fully tap the financial market in Shanghai in terms of clearing in yuan
3. Develop over-the-counter markets for non-listed companies in the Yangtze River Delta region
4. Study a mechanism to help companies traded on the OTC markets to be transferred to the main stock boards
5. Develop pension products that offer tax breaks to encourage people to pay into pensions
6. Encourage more international development institutions to issue yuan-denominated bonds
7. Study plans to allow overseas enterprises to issue yuan-denominated bonds in China
8. Find a good time to allow qualified overseas companies to issue yuan-denominated shares
9. Step up development of the re-insurance market
10. Give priority in terms of business expansion to Sino-foreign securities and fund-management joint ventures
11. Encourage financial institutions to cover a full range of businesses
12. Encourage the development of private equity and venture capital companies
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