The central government's recent decision to speed up the process of turning Shanghai into a major international financial center, on par with New York and London, by 2020 has received ringing endorsement from local officials.

Tu Guangshao, vice-mayor of Shanghai, said the move signaled a "clear national strategy" for China to develop an international financial center that matches its "own economic power and the yuan's international position", at a recent seminar.

"China has witnessed robust growth in its economy for 30 years. The leading position of its economy now calls for similar systematic financial development," he said.

The Shanghai municipal people's congress will soon announce policies intended to speed Shanghai's transformation into a financial center, particularly ones aimed at attracting talented financial professionals, said Tu.

Professor Lu Hongjun, chairman of the International Financial Centers Association, said that, under challenges such as the ongoing financial and energy crisis, the dominance of the financial centers formed during the 20th century is coming to an end.

He said he expected that in the post-financial-crisis era, the global layout of financial centers will become pluralistic with both developed nations (such as US, UK and Japan) and new economies such as the BRIC nations (Brazil, Russia, India and China) playing key roles.

"During this process, China should gradually become a leading force in the international financial system, especially in reforming the global currency system," he said.

Shanghai and Hong Kong will steady grow in importance, making China a "stabilizer" for the world economy, he said.

Tu agreed with Lu and said that the financial roles of Hong Kong and Shanghai will compliment one another.

"Hong Kong is already a mature international financial center and it has played a key role in pushing China's financial development," said Tu.

But some experts say that poor financial product innovation and low risk control in Chinese financial institutions will hold back Shanghai's international finance hub aspirations.

"Financial institutions' real competence capacity is the basis of evaluation for any international financial center, but China's financial institutions are still far from where they need to be in that regard," said Zhang Guangping, deputy director of the Shanghai banking regulatory bureau.

"China's GDP accounted for 6.2 percent of the world economy last year, but not a single interbank product from a Chinese bank accounted for even 0.1 percent of total global value in 2007. This proves our financial sector's development doesn't match our actual economic strength," he said.

He added that, for now, innovation of yuan-related products is the most imperative task if Shanghai wants to build itself into a world financial center.

"So far Chinese banks have shown no innovation with new yuan-related banking products," said Zhang.

Foreign banks were responsible for 80 percent of yuan-related financial products that launched over the last two years, while Chinese banks mostly stuck to simple savings products over the same period, he said.

(China Daily April 13, 2009)