The State Council of China has set an ambitious goal of transforming Shanghai into an international financial centre by 2020
By drawing parallels between the established financial hubs of London and Frankfurt, Prof. Horst Loechel, Director of the German Centre of Banking and Finance at CEIBS, explores whether or not China’s goal is realistic and what it would take to achieve it.
1. Why has China made this goal of transforming Shanghai into a financial centre by 2020 such a priority? What are the advantages that will come with achieving this goal? Are there any downsides?
Horst Loechel: The plan to develop Shanghai into an international financial centre by 2020 is part of China’s overall development plan of as it moves towards becoming an advanced economy. Finance is a very, very important part of this plan – nationally as well as at the international level, because in order to become an advanced or developed economy, you need a full-fledged financial sector. And Shanghai is somehow the frontrunner to develop China’s financial sector into a modern banking and finance system, with sophisticated capital markets and international banks.
And the third strength is the government. The central government and the local government are supporting this process and political support is vital in China, as it is in Asia and the world.
[Reprinted with permission from The China Europe International Business School.]