After years of development, Shanghai has largely established itself as an international financial center commensurate with China’s economic strength and the international status of the RMB. Despite the impact of the new round of epidemic in Shanghai since late March, which had a major impact on the normal economic and financial order, Shanghai has ensured the smooth operation of its functions as an international financial center while adhering to the general policy of “dynamic zero-COVID”.

The financial markets are well-diversified and a number of markets rank among the world’s largest in terms of transaction size, with core functions such as market pricing, payment clearing and risk management, etc. being continuously improved. As one of the most concentrated financial factor markets in the world, Shanghai brings together 14 national financial factor markets for stocks, bonds and futures, etc., as well as more than 6,000 Chinese and foreign financial institutions of all kinds, such as banks, funds, insurance, trusts and capital management, etc. The total annual turnover of the financial market exceeds RMB 2,500 trillion, and foreign financial institutions have accounted for about 30% of the total number of financial institutions in Shanghai. The direct financing function of the capital market continues to be prominent. Shanghai has more than 400 listed companies and has raised more than RMB 1.3 trillion in the past three years through the capital market, ranking among the top three in the world in terms of fund-raising volume. The volume of spot gold trading has ranked first in the world for 14 consecutive years, and the application of “Shanghai Gold” pricing in the international financial market has been expanding. Shanghai ranks first in the world in terms of trading volume for a number of futures varieties, and has ranked as the third largest futures market of crude oil in the world. The two-way opening up of financial markets of the inter-bank bond, foreign exchange and currency, etc. has accelerated. From the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect to Bond Connect and then the Shanghai-London Stock Connect, significant progress has been made in the interconnection of domestic and foreign financial markets, market participation of foreign entities has increased significantly, and the influence and capacity of Shanghai as an international financial center has been increasingly enhanced.

Since the current round of epidemic, major exchanges, brokerages, futures companies, settlement institutions and other institutions directly related to trading in Shanghai have implemented various methods such as alternating shifts and “closed core operation and maintenance + multi-location offices” to ensure that trading in various financial factor markets has been carried out smoothly and orderly while fighting the epidemic scientifically. The number of IPOs listed on the stock market in April was 82, unchanged from March, and the amount of financing was RMB 183.8 billion, up from March rather than down. From the trading situation of the Northbound Stock Connect, there was a net inflow of foreign capital from January to February, a net outflow in March, and then a net inflow in April, and there was no significant outflow of capital affected by the prevention and control of the epidemic in Shanghai. The combined turnover and average daily turnover of the bond market in April were RMB 22.12 trillion and RMB 1.16 trillion respectively. Although the combined turnover fell slightly due to the shorter number of trading days, the average daily turnover rose by nearly 5% compared to that in March; the foreign exchange market saw a continuation of the overall net inflow of cross-border funds in China in April, with supply and demand in the foreign exchange market maintaining a basic balance. The banking foreign exchange sale and purchase continued to maintain a surplus of RMB 122.4 billion. Foreign financial institutions also continued to be bullish on Shanghai’s financial development and did not change their mind about long-term deeper engagement in China’s capital market due to the short-term impact of the epidemic. Leading international investment banks such as Goldman Sachs, JP Morgan and Credit Suisse, etc. continue to expand their business development in China, and are actively recruiting top talents in the financial and technology sectors during the epidemic. A number of international capital management institutions such as Hamilton Lane, CCB International, CDH Investments, JAFCO Asia (Phase II), BlackRock Funds and Anzhong Investment, etc. are actively participating in the QFLP and QDLP pilots, fully demonstrating their confidence in the prospect of building a global capital management center in Shanghai.

Looking back over the past two years, China’s unwavering adherence to the general policy of “dynamic zero-COVID” has enabled the Chinese economy to demonstrate remarkable resilience and dynamism that amazed the world based on the implementation of scientific measures to prevent the epidemic. At present, the short-term shock of the epidemic will not change the fundamental long-term positive dynamics of the Chinese economy. According to the latest results of the IMF’s quinquennial Special Drawing Right (SDR) valuation review, the weight of the Chinese renminbi was raised from 10.92% to 12.28%, an increase of 1.36 percentage points, while the composition of the existing SDR basket of currencies remained unchanged, continuing to remain in the top three positions in the SDR currency basket. The SDR share of the Chinese renminbi has been further increased, and foreign exchange reserves and reserve assets denominated in SDR continue to rebound. With the expanded opening of the capital account and the continuously deepened reform of the RMB exchange rate regime, the investment returns of RMB assets will become increasingly popular with international investors.

Under the epidemic, Shanghai as an international financial center has further highlighted its resilience and potential. With the increasing internationalization, marketization, legalization, digitalization and greenization of Shanghai as an international financial center, the global resource allocation function and core competitiveness of Shanghai as an international financial center will be further enhanced and it will definitely become a global center for RMB product innovation, trading, pricing and clearing.



Source: Jiefang Daily 

By Sun Lixing (Researcher at Shanghai Academy of Social Sciences Institute of World Economy)