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November 11, 2013

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Home » Business » Finance Special

Eric Lian - President and CEO, UOB China

Source: Shanghai Daily | November 11, 2013, Monday | Print Edition

On Shanghai’s strength & weakness

Shanghai’s primary strength is in its “location” for economic radiation into the whole of China and the Asia-Pacific region. Shanghai enjoys a good geographical location, being in the center of that region and highly accessible to Southeast Asia, Northeast Asia and the Greater China region. Shanghai’s geographical advantage was made more obvious when Chinese leaders, during their recent visit to Southeast Asia, proposed the rebuilding of the Maritime Silk Route.

Located in the Yangtze River Delta, Shanghai’s development is backed by the China (Shanghai) Pilot Free Trade Zone.

In the next decade, this region will become another new economic growth point in China. The regional advantage of Shanghai determines its role and competitive edge in leading and driving China’s national economy.

To be a true international financial centre, Shanghai needs to establish regulatory and legal systems that are more rigorous than those of other regions. Preferential taxation policies must also be formulated so that capital and talent can be attracted from multinational enterprises and financial institutions.

Shanghai has a very solid financial infrastructure, leading other domestic regions both in terms of software facilities and hardware construction. The talent pool is also bigger than that of other domestic regions.

This is a city that attracts many industrial players with commercial and financial understanding. As a foreign bank in Shanghai, we are able to enjoy the established foundation and market potential as we develop our overseas and cross-border businesses. While there are restrictions set by the relatively rigorous financial regulatory policies, we have seen some breakthroughs recently, evidenced by the conversion of capital accounts, pilot measures of interest rate liberalization and innovation in offshore financial activities in the free trade zone.

On yuan convertibility

China has always been an attractive capital market as the second-largest economy in the world. With financial reform, financial organizations are able to find many opportunities as the market opens up and the yuan internationalization quickens its pace.

As for the next step, there are many things China can do as far as financial innovation is concerned.

At the moment, China’s financial market exists mainly in the forms of bank deposits, loans and indirect financing. If the financial market is fully opened up, there will be huge opportunities that will surely attract foreign investors. This may be demonstrated in many areas, such as the transition from traditional bank deposits and loans to higher-end, value-added strategic businesses such as investment banking, which is not yet a fully developed banking service in China.

For an emerging market such as China, there is still a long way to go to achieve a fully convertible yuan under capital accounts. This is also dependent on the status of the yuan’s internationalization. When the yuan becomes a global currency, any movement will impact the entire global currency system. The significance is not only for currencies but also for economies and trade. In the financial industry, this will also mean more innovation in financial regulatory policies, products and services, as well as business operations.

On free trade zone

The China (Shanghai) Pilot Free Trade Zone is a trailblazer in China’s economic upgrading and development. It also enjoys the benefits of Shanghai’s geographical and policy advantages. In the past 20 years, many innovative measures have been implemented in Shanghai’s bonded areas, and such measures will be enhanced further in the free trade zone.

During their recent visit to Southeast Asia, China’s top leaders Xi Jinping and Li Keqiang proposed the rebuilding of the Maritime Silk Route and the restarting of China-ASEAN Free Trade Area negotiations. China also promised to provide access in trade and investments.

It is estimated that the total volume of trade between China and ASEAN will witness a rapid increase in the next decade. Therefore, the location, structure and pilot reform measures of the Shanghai free trade zone will undoubtedly play a paramount role in supporting the development of China-ASEAN relations.

United Overseas Bank is one of Singapore’s three major banks. Singapore is not only an offshore yuan center, but it also has wealth of experience as both a global financial center and shipping hub. We believe that we will be able to benefit from the strong ties that Singapore and China enjoy.

On economic reforms

Shanghai has indeed been at the forefront of reforms as we have seen from the policies introduced in recent years. Foreign banks may not have a very big market share in China currently, and some may be witnessing less-than-ideal growth.

However, we think highly of China’s economic growth trends and increasingly important role globally, especially in international finance and capital markets.

To sum up, what we truly value are the strategic opportunities present here. We hope to see China continue to open up and deepen its reforms so that financial and legal systems will be more aligned with international standards.

Other advice

We value the long-term opportunities arising from China’s economic growth. The “going out” of Chinese enterprises and the “coming in” of foreign enterprises present huge opportunities for us to strengthen our cross-border business as we tap into Shanghai’s financial policies.

We hope to see Shanghai, following the pilot free trade zone, establish its position as an international financial center soon and create a market framework for both local and foreign enterprises.

Now listed on five major global financial markets, HSBC desires to be, when permitted, among the first international companies to list in Shanghai.

Finance Special


 

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