CHENGDU, capital of the southwestern province of Sichuan, is well on its way to becoming a major regional financial hub, and yet it eyes greater achievements in the coming years.

The city ranked as the top financial center in inland and western China last year, and the eighth nationwide for two straight years, according to the China Financial Center Index compiled by the Shenzhen-based think tank China Development Institute.

Total value of the finance industry in Chengdu grew 18 percent last year from a year earlier to 89.3 billion yuan (US$14.6 billion). That was triple 2009’s value with an average annual growth rate of 32 percent. It is expected to reach 100 billion yuan by 2015.

The financial industry accounted for 20 percent of the service sector and 10 percent of Chengdu’s GDP last year, showing a rising contribution from 13 percent and 7 percent in 2009, respectively.

The city has become home to many financial institutions. By the end of January there were 61 banks, 72 insurance companies, 87 securities and futures brokerage firms in the city. It was also home to three trust companies, four financial management companies, 16 third-party payment agencies, 112 small loan companies, 152 financing guarantee companies and 240 investment funds.

Chengdu tops other cities in the inland and western regions in both number and types of financial institutions.

Substantial growth

The financial market in Chengdu has achieved substantial growth as bank deposits, premium income and the amount of financial guarantees provided have expanded significantly. By the end of last year, the outstanding amounts of yuan-denominated deposits and loans were 2.4 trillion yuan and 1.8 trillion yuan, respectively. Premium income amounted to 42.4 billion yuan. Meanwhile, direct financing is expected to reach 252.3 billion yuan this year, which is up 72.3 billion yuan from last year.

Chengdu pioneered the development of back office outsourcing services for financial institutions. It has attracted the back office operational centers of 14 financial institutions including Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Australia & New Zealand Bank, China Pacific Insurance, and Ping An Insurance.

Additionally, more than 50 third-party outsourcing service providers for financial companies’ back office operations have added more cluster initiatives for the business development of this particular service sector.

Chengdu also has 304 accounting firms, 3,071 chartered accountants, 380 law firms, 2,652 practicing lawyers, seven credit rating agencies, 25 notarization institutions, and over 1,500 asset evaluation agencies. Coupled with a slew of patent agencies, insurance brokers, and trademark agencies, the city has formed a relatively comprehensive system of financial intermediation services.

The financial industry in Chengdu has become more internationalized, as the government strengthened international exchanges and cooperation. There are 15 overseas banks, 17 foreign insurance companies, and seven foreign small credit companies in the city. Additionally, Malaysia-based Hong Leong Bank, International Finance Corp, a member of the World Bank Group, and Standard Chartered Bank have all made successful foreign direct investments in the city.

Chengdu strives to improve the development of its financial environment. The financial headquarters business district has 150 financial institutions and related support organizations. Value added reached 11 billion yuan in the district last year. Furthermore, the number of financial professionals grew 15 percent year on year on average in the past five years to 94,000 last year, 11 percentage points higher than the growth rate of the entire service sector in general.

Real financial hub

Although Chengdu has achieved many positive results during the construction its financial center in western China, it has weak links in some areas. These include the weak influence of its financial institutions, a relatively small financial market size, inadequate servicing support for the financial industry, weakness in supporting the real economy, and needed improvements in the financial ecological environment, which relates to the use of financial tools to protect the natural environment.

There’s also a big gap between Chengdu and other top financial centers in the country like Beijing, Shanghai and Shenzhen.

By the end of 2012, there were only two locally incorporated commercial banks in the city, compared to Shanghai’s 24, Beijing’s 17, Shenzhen’s eight and Chongqing’s three.

The scale of the financial market is an important indicator for the development of a financial center. The size of Chengdu’s financial sector is relatively small, and there’s a big gap between the city and a real financial hub.

To promote the construction of Chengdu into a real financial hub, the local government plans to attract more renowned domestic and overseas financial institutions to set up regional headquarters or local corporations in the city. It will continue to invest and bring in domestic and foreign banks, insurance companies, securities and futures brokerage firms, trust companies, and asset management companies. By 2015, the cluster development of the financial industry should be initially formed.

The city will promote the development and growth of locally incorporated financial institutions by helping them with public listings, mergers and setting up branches in cross-regions. The government prioritized a few projects like helping the Bank of Chengdu and Chengdu Rural Commercial Bank to expand their business scope, build cross-regional operations and go public.

It also helped build Chengdu Investment Holding Group into a fully licensed leading financial company in the country and helped it to get listed in Hong Kong. It supported small credit guarantee companies in getting listed in overseas markets, and supported Jintai Insurance in expanding cross-regional businesses. And it helped qualified financial institutions participate in the merger of state-owned enterprises in the city.

Chengdu will continue to build a capital market with multiple layers by strengthening the existing exchanges, building over-the-counter markets, and actively exploring the development of financial innovation.