On Shanghai’s strength & weakness

Shanghai, being an important economic, financial, trade and shipping center in China, is one good example. The approval of Shanghai’s growth blueprint by the State Council will help Shanghai boost strong economic growth and develop into an even more influential financial center by 2020.

The municipal government has taken initiatives to improve the micro-economic business environment, especially strengthening its soft power. That will help grow the domestic market’s financial and business services. Other suggestions include regulatory reforms, modernization of the city’s infrastructure and greater transparency, to better meet international standards and help retain talent.

Over the past two decades, the government leaders in Shanghai have adopted innovative measures to enhance the city’s competitiveness and quality of life. These measures continue to this day. The strategic development objective is to build Shanghai into a world-class city of business services, transportation, communications infrastructure and commercial facilities.

These efforts are turning Shanghai into an attractive city, luring and retaining professionals, highly skilled technicians and administrators, both from within China and abroad. The progress the city has made in the following areas is remarkable — better public transportation and airport infrastructure, affordable housing, open space and public parks, world-class cultural institutions, a highly desirable and effective public school system, and easier access to high quality medical services.

Shanghai has achieved unprecedented growth, prosperity and global stature over the last two decades. As Shanghai continues to scale new economic heights, it has the opportunity to become a center of economic success and to produce an outstanding quality of life.

On yuan convertibility

With a population of 1.3 billion, China has become the rising world economic center and the second-largest economy, and it is increasingly playing an important and influential role in the global economy.

That will bring about incredible opportunities to institutions in the financial sector, especially on the investment, refinancing and reinsurance side.

Besides a fully convertible yuan under the capital account, we hope for further opening of the financial market: a global equity market with strong liquidity, a high efficiency bond trading market in the local currency, a large currency trading market with strong liquidity, an active financial derivative market to help local and regional enterprises to manage their credit, interest rate, monetary and political risks, an efficient insurance and reinsurance market to provide comprehensive products and services to the multinational companies.

On free trade zone

The insurance sector will play an important role in the China (Shanghai) Pilot Free Trade Zone. There will be some opening up of capital operations in the zone, such as a fully convertible yuan under the capital account, which might be an opportunity for insurance companies’ capital operations. For cargo insurance, on the other hand, there will be more opportunities to develop business as well as contribute to the establishment of an international shipping center.

As a global company tracing its roots in Shanghai back to 1919, we are willing to participate in and contribute to the building of the free trade zone. This raises a lot of opportunities for insurance companies. We will need further studies to see how we can best fit into the overall framework to participate and contribute.

On economic reforms

We have seen tremendous changes in the past decades and the promising opportunities in the future arising from the initiatives to build the international financial and shipping centers and now the China (Shanghai) Pilot Free Trade Zone.

Shanghai has been the pioneer and leader in national reforms in economic and financial operations, which has brought attractions to foreign investors like AIG. We do foresee a lot of opportunities ahead and would like to harness those with our great local talent and global insights to fulfill our lasting commitment in Shanghai and China.

Other advice

According to the International Monetary Fund, international finance centers are large, international full-service centers with advanced settlement and payments systems, supported by large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal-agent relationships and supervisory functions.

Shanghai is aiming at achieving this by 2020. It is a realistic targeted. Several initiatives have been implemented to improve the microeconomic business environment — for example upgrading infrastructure, human-capital resources and quality of life.

While facing strong competition from well-established rivals such as Hong Kong and Singapore, Shanghai managed to meet its short-term goals of being a highly profitable, specialized regional center of financial services contributing to China’s globalizing economy.

Almost all forecasts predict significant and continued economic growth in China. Shanghai will benefit from this unparalleled growth rate. Shanghai’s insurance market will also benefit and grow in tandem.

The insurance market will aggregate capital and surplus, which will assist in fostering the capital levels and capacity needs to support establishing a regional insurance center and ultimately a global center.

To achieve this, a free and open market with justice, a transparent and contemporary regulatory regime and support from the government and relevant organizations are essential. Also, a less-administrative, less burdensome regulatory structure with more market-driven approaches should be considered. This will encourage businesses to bring in world-class best practices, advanced technologies and optimized operating models.

An open insurance market leads to strengthened institutional capacity, high quality regulation, sound supervision and transparency, which are essential to investors and intermediaries in world-class markets.

It is clear that Shanghai has many of these positive characteristics. So, it is time to build an outstanding national center, which can be leveraged to a regional or even global prominence. In fact, world-class insurers are being attracted to set up businesses in Shanghai.

Shanghai is the city with the most globalized genes in China, even outshining many foreign cities.