Hu was quoted as saying that the central bank aimed to "consolidate its resources and improve its operational efficiency" by setting up such a body in Shanghai.

The Shanghai "super branch" will assist the central bank's decision-making processes by being in a position to obtain more relevant market information.

But the Beijing headquarters of the central bank and its Shanghai branch remained tightlipped about the report.

A leading official from the Shanghai Banking Association said that although he not yet seen any official documents related to the decision, it would significantly propel the city's construction into an international financial center.

The official, who wished to remain anonymous, added that the proposal to set up a headquarters in Shanghai was already several months old.

"It is not proper to call it a headquarters because it will actually be a subordinate with more privileges than any other local branches of the central bank," he said.

He revealed the mode is a copy of the Federal Reserve System in the United States with the Federal Reserve, the central authority, based in Washington and the Federal Reserve Bank of New York playing a leading monetary role only subordinate to the central authority.

"It is also a necessity for the central bank because the financial market in Shanghai is more active and will allow the central authority to make accurate and quicker decisions," he said.

Beijing will continue to take care of monetary policy issues, while departments at the market operation level such as the credit management bureau and the anti-money laundering bureau will be relocated to Shanghai, confirmed the official.

"It is a great support to the city and Shanghai's financial leadership will be further enhanced," said Han Hanjun, an economist and director of the Research Office of Financial Theories under the Shanghai Academy of Social Sciences.

He revealed that insiders are using the term "second headquarters" to refer to the body to be set up in Shanghai and he learned that a deputy head of the central bank would be stationed in Shanghai to take charge of it.

All headquarters of the central bank and the "big four" commercial banks are based in Beijing, which hinders Shanghai's ability to obtain a solid financial position in the country, let alone globally, Han added.

By the end of 2004, the total assets of banking institutions in Shanghai reached 2.61 trillion yuan (US$315.6 billion), 8.3 percent of the country's total according to data released by the Shanghai Banking Regulatory Bureau.

Assets of foreign banks in Shanghai totaled 315.8 billion yuan (US$38.2 billion), achieving a yearly growth of 40.3 percent and accounting for 12.2 percent of the city's total.

(China Daily February 1, 2005)