Shanghai’s Got Two Engines for Its Development

Shanghai is on the way of building itself into an international financial center and international shipping center, which have become two engines for its development.

At the beginning of November 2009, Hua’an Fund, one of the largest fund management companies in Shanghai, published a notice, saying that 20% of its shares which were previously taken by Shanghai Feidian Investment Development Corp were transferred to Guotai Jun’an Investment Management Co., Ltd. That meant the beginning of the reform to the state-owned financial capital in Shanghai. Several days later, Shanghai Shipping Exchange published the new Shanghai Containerized Freight Index, which lay a foundation for introducing the shipping financial derivative in the future.

At the end of 2009, Shanghai’s two engines for its economic growth – the construction of international financial center and international shipping center, were still rotating at their full speed. With the help of national policies, a series of activities for optimizing resource allocation and adjusting structure were launched.

On March 25, 2009 the State Council (Cabinet) made the decision to encourage Shanghai to develop the modern service industry and advance manufacturing industry to realize the double goals. By 2020, Shanghai will have become an international financial center matching China’s economic power and RMB’s status in the world, as well as an international shipping center having the ability of arranging the global shipping resources.

From then on, Shanghai subsequently completed 14 of the 93 main projects of building Shanghai into an international financial center, including the pilot of the RMB cross-border settlement and the establishment of the first financial industry fund in China. About 16 projects have had certain plans formed, including the construction of credit transfer market, real estate investment trusts and so on.

Meanwhile, both the domestic and foreign financial institutions are gathering in Shanghai. By the end of September 2009, 20 foreign banks have settled down in Shanghai, taking two thirds of the foreign banks in China. In addition, SVB-Silicon Valley Bank, Draper Fisher Jurvetson and the other 7 foreign equity funds are also stepping into Shanghai, which has already become the most charming emerging markets for the international private equity.

In July 2009, the long-prepared Advices on Further Promoting the Reform to Shanghai State-owned Financial Capital and Enterprises was officially published, showing the clear direction for the reform to Shanghai state-owned financial intuitions. From then on, Shanghai started to consummate the management system for the state-owned financial capital to promote the reform and reorganization of the market, to improve the core competitive power of the state-owned financial enterprises, and to optimize the distribution of state-owned financial capital. These projects all serve for one goal – to build Shanghai into an international financial center.

Shanghai’s resolution in becoming an international financial center was not only reflected in the policies for the state-owned capital and big enterprises. From 2009, nearly every bank in Shanghai set up its special department in lending and managing the loans for the small- and medium-sized enterprises (SMEs). In addition, the small-amount credit companies, re-guarantee companies, credit insurance financing and pawning financing of intellectual property have become the common ways for the SMEs to solve the problems of financing.

Shanghai is arising as a new international financial center. Meanwhile, it is playing a more and more important role in the international shipping industry.

China’s central government is actively making comprehensive plans for the ports of Yangtze Delta Areas, trying to unify the 16 ports in this place together. Shanghai has formed several special teams to promote the construction of Waigaoqiao port area, Yangshan deep-water port and home port for international liners. These projects are under construction at this moment.

The experts believed that it is a meaningful national strategy of heightening the status of Yangshan deep-water port and constructing the comprehensive pilot area for international shipping development. In order to gain the support from the central government, Shanghai government has united with transportation department, customs and the other relevant departments to put forward the pilot plan of implementing the tax rebate policies at departure ports.

At the beginning of December 2009, the global second largest shipping giant Mediterranean Shipping Company (MSC) set up its exclusively-funded shipping service company in Shanghai, which was another highlight in Shanghai’s construction of international shipping center. MSC had been forced to develop its business in China through setting up representative offices due to the legal barriers since it got into this country in 1998. In 2009, Shanghai government issued several policies to encourage more international shipping giants to gather in Shanghai and set up their exclusively-funded shipping service company there.