China to Make Shanghai Global Yuan Hub by 2015
The plan, published by the National Development and Reform Commission, China's top economic planning agency, and the Shanghai government, shows the scale of the country's ambition in creating its own version of New York or London.
It envisages Shanghai becoming a leading international financial hub and global center for yuan trading, clearing and pricing by 2015.
By then, the Shanghai Interbank Offered Rate and the yuan central parity rate will become major benchmarks for yuan asset pricing and transactions both domestically and internationally.
Yesterday's announcement was the first detailed follow-up since the State Council announced in 2009 its aim of making Shanghai an international financial hub by 2020.
To achieve these goals, Shanghai will speed up infrastructure construction to build a cross-border yuan payment and clearing network geared toward global demand, an unidentified Shanghai official said in a statement. A cross-border yuan investment and financing center will also be established, he said.
Shanghai and Hong Kong, as two major financial centers in China, will continue to step up communication and cooperation in areas such as financial markets, institutions, products, businesses and talents, he added.
Economists said the plan coincides with Shanghai's long-term mission to become a leading international financial center, adding that authorities may speed up liberalization of yuan exchange rates and interest rates to meet the goal.
But they also pointed out some shortcomings, such as immature financial institutions, non-transparent operations, and the tight controls on conversion of the yuan and use of foreign exchanges, will limit Shanghai's role in global markets.
"Compared with the long-term targets announced three years ago, the newly released detailed plan has a clearer focus on the yuan deals," said Zhou Hao, an economist at ANZ Bank. "The gradual internationalization of the yuan provides a good foundation for Shanghai to realize its goal. Shanghai, as a top domestic financial center, will be the best place as a yuan center."
He said the city's status would be lifted as China aims to expand yuan settlement in cross-border trading, and the need to develop the city's international appeal will also push authorities to speed up market-oriented reforms of exchange rates and interest rates.
Lu Zhengwei, a chief economist with the Industrial Bank, said the plan is effectively urging the goal to be realized five years earlier than originally planned.
But Zhou said the government's regulatory stance may have a significant impact on the city's attraction to global financial players. "There's no doubt that Shanghai will become a robust international financial center by 2015, but its local importance may still exceed its global one ..."
The authorities are also aiming to boost the transaction value of financial markets in Shanghai, barring foreign exchange markets, to around 1,000 trillion yuan by 2015.
By then, direct financing, such as fundraising from domestic stock and bond markets, will account for around 22 percent of the social financing in Shanghai, while assets under management will reach 30 trillion yuan, the statement said.
The scale of overseas investment in the city's financial markets will be markedly expanded by that time, with major stock indices and commodities futures prices of those markets having a greater global influence.