Advanced Search

The story appears on

Page C6

November 11, 2013

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home » Business » Finance Special

Nora Wu - Global Board Member, Shanghai Senior Partner, PwC

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

On Shanghai’s strength & weakness

Both the public and private sectors are supportive of Shanghai’s ambition to be an international financial service center by 2020. They believe they can make significant contributions to the city. However, there are a number of challenges along the way, such as interest rate liberalization and yuan internationalization. The scope and pace of regulation will be key, but other perennial problems such as a talent shortage, legal reforms and the financial infrastructure will also need to be addressed.

Having said that, financial reform in the China (Shanghai) Free Trade Zone will be a good step forward in promoting the development of China’s financial markets and its further opening-up to the international financial community. It will also derive innovative financial products and promote the functional upgrade of the China international financial center.

On yuan convertibility

It is likely that the yuan will be made fully convertible step-by-step — with one of the first steps to encourage domestic capital in overseas investment and overseas financing. Once a relaxed institutional environment is created, enterprises should respect the market order and improve the credit system.

In the pilot area, the government is introducing a series of institutional innovation policies, including the opening of capital accounts, full yuan convertibility and simplified registration procedures. If we use economic terminology to describe the ultimate goal of these policies, we would say they are facilitating “effective” not “free” flow.

At the same time, once a favorable policy environment is created, companies need to be self-disciplined, by respecting the rules of market order and by improving their credit systems.

On free trade zone

Overall, financial reform will push the internationalization of the yuan forward. For Chinese enterprises, this reform will enhance their cross-border fund management efficiency and support their “going out” strategy. For multinational companies, the reform will enhance their regional headquarters’ functionality and the benefits they receive.

Looking at the FTZ’s plans, foreign banks will be encouraged to establish a branch directly within Shanghai in a shorter period of time. They may also receive licenses for corporate or individual yuan business, while the joint ratio requirement may be relaxed. The onshore and offshore business may also be able to work more closely together.

Traditionally, Chinese enterprises, both state-owned and privately owned, would use an overseas business management platform in Hong Kong, Singapore or even in particular European countries as their investment platform for offshore financing and management of funds.

If the FTZ could create conditions comparable to these overseas platforms, it would be regarded as a new destination for Chinese companies to consider establishing their global headquarters.

For many multinational companies operating in China and for those who have regional headquarters based there, a relaxed financial and foreign exchange environment could help their regional funds management and settlement. This would enhance the functionality and scope of influence of their China-based headquarters. Meanwhile, it can also promote China’s economic restructuring and create a development model to promote China as a destination for an multinational company’s regional or global headquarters.

On economic reforms

Enterprise development requires a good living environment. We have advocated building a harmonious society to ensure that the interests of all parties reach an equilibrium.

The business and legal environments for enterprise development are vital external factors, while the government’s sense of service and support will play a positive role in promoting the city.

Other advice

Shanghai currently enjoys strong central government support for its transformation into a global leader in finance. In order to achieve this goal, Shanghai must be able to continue embracing openness and diversity, improve on intellectual property protection and create a very friendly environment both to doing business and living in the city.

The most fundamental issue is the creation and cultivation of an environment that draws the best and brightest, not just country-wide but globally.

Finance Special


 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend