By Wang Zhenghua (China Daily)
Updated: 2008-01-14 10:24

Foreign banks

The influx and impressive growth of foreign banks in the past year have greatly enhanced the city's expertise in a wide range of financial businesses. Their newfound local status, which gives them an equal footing as their Chinese peers, has boosted their efforts to launch innovative products in both retail and corporate banking. Since four foreign banks were locally incorporated in April, a dozen have been approved to set up local entities in Shanghai.

The government's planning has played a crucial role in nurturing the growth of the city's financial sector. The introduction of the Shanghai Interbank Offered Rate (Shibor) last year laid the foundation for enabling the country's monetary authorities to achieve macro-control indirectly by adjusting the benchmark interest rate rather than maneuvering the money supply.

Landmark efforts in 2007 also included the expansion of an integrated system to record personal and corporate credit histories, which helps improve the city's credit environment and reduces financial risks. More than 600,000 enterprises and 7 million individuals have been included in the system.

Great achievements have been made in Pudong New Area - home to 476 financial institutions and a zone that will play a crucial role in making Shanghai's global dream come true. The GDP of its financial sector accounts for one-sixth of the area's total, a level similar to other international financial centers. By 2010, more than 600 financial institutions are expected to have operations in the area, employing 200,000 people in the finance industry, whose GDP is likely to exceed 18 percent of the total.

"The focus will be on the capital market, and we'll make great efforts to attract asset management companies," says Sun Wei, a sub-director of the area's financial service office.

Financial information providers, such as law firms, accounting firms and professional rating companies will also be targeted this year.

Commodities market

Last year witnessed giant leaps in the domestic futures market with the introduction of five new futures contracts - zinc, rapeseed oil, palm oil and chemical products PTA and LLDPE - on Dalian, Zhengzhou and Shanghai commodity exchanges.

Compared with the other two exchanges, Shanghai bourse is playing a particularly crucial role in developing this market. Last year, the total turnover of all contracts on the Shanghai Futures Exchange (SHFE) amounted to 21.76 trillion yuan, up 72 percent from the year before. It accounted for no less than 70 percent of the combined volume of futures transactions on all the three commodity exchanges.

Cooperation with foreign exchanges helps SHFE hone its competitiveness and exert increasing influence in the international futures market. In November, SHFE inked a deal with Central Japan Commodity Exchange to collaborate in a wide range of fields, including information sharing, staff training, product research and development, and market promotion. SHFE President Yang Maijun says the exchange will seek more such alliances and expand its product range.

After launching gold futures last week, SHFE is working on other new contracts, including nickel, silver and steel futures, in the years to come.

Beginning from late October, China Financial Futures Exchange, where the proposed CSI300 index futures is to be traded, has approved 52 futures companies as the exchange's members to trade. This is widely seen as a major step toward the launch of the mainland's first index futures.

Talent scarcity

But there is one major hurdle in Shanghai's race to the top. Officials, scholars and company executives in financial service sectors point out that the city needs to have a pool of highly skilled professionals if Shanghai is to achieve its goal of becoming an international financial center.

"Talent is at the core of this endeavor," said Tu Guangshao, former vice-chairman of China Securities Regulatory Commission now vice mayor of Shanghai at a recent summit of China Financial Talents Strategy. "It takes 10 years to grow a tree and a hundred years to bring up a generation of quality people," he said, stressing the importance of specialized education and cultivation of specialized experience for finance professionals.

In a survey of 40 CEOs, Chen Wei, China president of global management consultancy Hay Group, says the biggest challenge for Shanghai in competing with other financial centers lies in its scarcity of talent. Compared with the United States, which has approximately 25,000 people with Chartered Financial Analyst certificates, there are only dozens of them in China. That's far behind even Hong Kong or Singapore that have about 1,000 such professionals each.

"Most of China's businesses in the financial sector are incapable of producing global leaders," says Chen.

As Yan Qingmin, sub-director of the China Banking Regulatory Commission, puts it, "wisdom" comes ahead of "system".

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