Shanghai International Financial Center to have Global Vision, Says China's Economy & Policy25 May 2012 • by Natalie Aster
The development of Shanghai as an international financial center has been upgraded to a national strategy. This is not only of great significance for the economic and social development of Shanghai, but will also have a far-reaching influence on the economy of surrounding areas and the entire Chinese nation. However, compared to a typical global financial center, Shanghai still has much to do in developing its financial markets.
According to the article “The Development of Shanghai as an International Financial Center” by China's Economy & Policy-Gateway International Group (China's Economy & Policy), the development of Shanghai as an international financial center will result in a series of significant changes to China’s economy and society.
The Development of Shanghai as an International Financial Center
Published: April, 2012
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First, during the development period, Shanghai will serve as an experimental pilot for national financial reform. It is well known that multiple preconditions are required for the construction of an international financial center, and there are still numerous deficiencies in the financial environment in Shanghai and throughout the country which make it difficult to meet the requirements of international financial operations. In view of the large gaps in the levels of regional development in China, it is not feasible to relax restrictions on the overall financial system. Therefore, Shanghai will be able to act as the main region for the trial of various policies, systems, mechanisms, etc., thus directly forcing and driving financial reform in China.
Second, there will be a variety of direct or indirect influences on domestic enterprises and individuals if Shanghai were to head an RMB global center. First, led by the trial in Shanghai, interest rate marketization in China will continue to accelerate, and restrictions on both deposit and loan rates will be gradually lifted so that commercial banks can determine the these rates according to the benchmark interest rate and their own operating conditions. For commercial banks, this will bring greater challenges; for ordinary people, this may provide a means to cope with negative interest rates during periods of inflation; and for enterprises, this will provide more choices. Second, the proposal for building a global RMB center in Shanghai as planned by the National Development and Reform Commission (NDRC) does not include the foreign exchange market. This indicates that the central government remains cautious about the free convertibility of the RMB, which conforms to the idea of progressive reform.
More information can be found in the article “The Development of Shanghai as an International Financial Center” by China's Economy & Policy-Gateway International Group.
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