On Shanghai’s strength & weakness

Standard Chartered believes that any city striving to be an international financial center need to fulfil five requirements.

To be specific, first, it needs to have an enormous domestic market. Compared with other financial centers such as Hong Kong and Singapore, Shanghai, located at the Yangtze River Delta, is well-positioned to maximize the robust regional economic growth, and enjoys the full support from China’s economic entity.

Second, there needs to be sound infrastructure for transportation, communications, telephones and networks, which are all directly related to daily business operations. Other infrastructure including good hospitals and educational institutions are also highly valued. And Shanghai does have strong hard power in this front.

Third, government support makes a difference. Whether officials are attentive to business needs and work hard to pave the way for financial development and innovation is an issue of probably the greatest concern to foreign investors.

Fourth, robust and flexible legal framework is needed, as well as a profound cultural foundation. Shanghai needs to continue to work on this aspect.

Last but not the least, a talent pool of high quality professionals is essential. Shanghai government pays close attention to talent and has introduced a number of incentives to attract talented people. The talent base has been largely lifted, but still requires further improvement. At the moment Shanghai still falls short of its demand for financial professionals, lawyers and accountants.

On yuan convertibility

The construction of Shanghai into an international financial center is inseparable from the liberalization of capital market, especially the bond market. Shanghai should establish an international yuan-denominated bond market for foreign enterprises to issue yuan bonds. The development of such a market would also assist offshore yuan to flow back onshore, which will move the internationalization of the currency forward.

The gradual opening up of equity capital markets should also be taken into consideration. A mature market will have both breadth and depth, with a diversified range of products.

For a very long time, China’s A-share market has been dominated by individual investors. But in Hong Kong and Singapore, there are higher proportions of institutional investors, which stabilize the stock market and extend its breadth and depth.

On free trade zone

The establishment of China (Shanghai) Pilot Free Trade Zone is an important measure for China to deepen its opening and reform process and become more integrated with the global economy. We are actively preparing for our operations in the zone and are committed to contributing to any further development by fully utilizing our expertise and international network.

On economic reforms

China is undergoing history-making economic reforms, and Shanghai, being the financial center, is at the forefront of innovation without any doubt. In this process, yuan internationalization represents one of the most profound changes in the world’s financial system in generations.

Foreign banks in China play significant roles in facilitating yuan internationalization. Standard Chartered is honored and excited to be the witness of this groundbreaking process. Being one of the first participants, we strive to be the driving force by staying at the forefront of regulatory update and market development, and well cultivating our onshore and offshore yuan service network. Up to now, we are able to provide yuan settlement services in more than 70 countries and regions and enable smooth implementation of cross-border transactions.

Currently we see strong performance of the yuan as an international settlement currency. In the long term, it is expected to evolve to become an investable currency, and eventually a reserve currency.

By 2020, China’s capital account will be basically open, the yuan’s exchange rate will be more or less liberalized, and the trade settlements in the yuan as a proportion of total trade of China will double to 28 percent. The four offshore yuan centers, Hong Kong, London, Taiwan and Singapore, will be increasingly important to the further internationalization of the yuan, and there will be more offshore centers to come.

 Other advice

In the economic globalization process, China is undergoing fundamental transition with Chinese companies breaking into international markets and global trade and investment becoming increasingly frequent.

With Shanghai developing rapidly toward a world-class financial center, there will be more expatriates coming into the city. As a result, the need for global financial services is rising for both corporate and individual clients. Standard Chartered is well prepared for both.

On the corporate banking side, we have been actively promoting the healthy and orderly development of yuan internationalization by leveraging our advantageous competence. We have a group of 168 yuan correspondent accounts to provide yuan settlement services in more than 70 countries and regions.

On the personal banking side, we provide comprehensive and customized international banking services with global insight, and via an international network and local branches. We also offer a variety of structured products for expats working in Shanghai, who are familiar with wealth management and have different risk appetites and investment habits, compared with local customers.

 In such a financial market that is changing so fast, people should be the core soft power of Shanghai’s construction into the international financial center.

The problem of talent doesn’t refer only to professionals.  The “global citizen” has become a very important concept. In addition to policymakers, regulators, financial professionals, entrepreneurs and managers, a considerable number of the general public should also become global citizens. That is how Shanghai can truly become an international financial center.

To be more specific, a global citizen should have good language skills, an international perspective, multicultural understanding and respect for rules and laws. Because modern finance is built on rules, small things like waiting in a queue or at a traffic light actually show the value and spirit of the city.

Shanghai is the city with the most globalized genes in China, even outshining many foreign cities. In modern times, it has always been the most open and international metropolises in China’s mainland. Many older generations of Shanghainese speak English and have a Westernized background and perspective. The city has deep roots of an international tradition, which is the gene of globalization.

We do see capital items fully convertible to yuan as an opportunity for multinationals to continuously enhance their liquidity and financial management.