Shanghai is the cradle of China's modern finance industry. [Photo/CFP]

Shanghai's financial market is experiencing robust growth, solidifying its status as an international financial center. The city has made remarkable progress in aligning with international financial standards, enhancing its ability to serve the real economy, and embracing financial innovation.

Financial infrastructure

Significant improvements have been made to Shanghai's financial markets and infrastructure. New institutions, such as the Shanghai Commercial Paper Exchange, the Shanghai Insurance Exchange, the China Trust Registration Co Ltd, the Cross-Border Interbank Payment System, and the City Commercial Banks Clearing, have been established.

Shanghai has become increasingly influential in global commodity pricing, particularly for gold, silver, oil, copper, and rubber. The China Foreign Exchange Trade System (CFETS) RMB Index has become an important benchmark for the renminbi exchange rate.

Shanghai's financial markets offer diverse products, including a growing number of futures and derivatives that are aligned with international standards, such as the first domestic shipping index futures, international copper futures, crude oil futures, crude oil options, and 30-year treasury bond futures.

Financial innovation

Shanghai continues to deepen financial reform and innovation, providing solid support to the real economy.

A pilot financial reform zone for science and technology innovation was established, providing comprehensive financial services to technology enterprises throughout their life cycle.

Significant improvements to the Science and Technology Innovation Board (STAR Market) have made it the preferred IPO listing destination for technology firms.

The STAR Market pioneered registration-based listing mechanisms, which have now been adopted by all markets in China.

Efforts are underway to build an international green finance hub. A green finance service platform was launched, with an initial selection of 11 projects, facilitating project financing totaling 3.58 billion yuan ($494.69 million).

The city has developed and released the Shanghai Transition Finance Catalog (Trial) along with its usage guidelines. Recently, banks such as Shanghai Pudong Development Bank and the Shanghai branch of the Bank of Communications have disbursed the first round of loans to support the green transition initiatives of industries listed in the catalog.

Shanghai continues to push forward the establishment of a global fintech center, providing improved financial products, businesses, and services to promote the development of the real economy.

Financial opening-up

Shanghai's pivotal role as a gateway for financial opening-up has become increasingly prominent, with the continuous expansion of domestic and international exchanges and cooperation.

The China (Shanghai) Pilot Free Trade Zone and its Lin-gang Special Area have made remarkable progress in piloting programs for financial opening-up and innovation. They have established a free trade account system and initiated pilot reforms in foreign exchange management related to cross-border trade and investment.

In 2023, Shanghai's renminbi cross-border settlement exceeded 20 trillion yuan, accounting for more than 40 percent of the national total and maintaining its leading position in China.

In recent years, an increasing number of domestic and foreign financial institutions have established a presence in Shanghai. All six newly established wholly foreign-owned fund management companies in China are in Shanghai. Additionally, all the foreign-controlled joint venture asset management companies established with the participation of China's five major banks are based in Shanghai. Furthermore, more than half of the newly established foreign-controlled securities firms are situated in Shanghai.

By the end of 2023, there were 90 qualified foreign limited partner (QFLP) pilot enterprises and 63 qualified domestic limited partner (QDLP) pilot enterprises in Shanghai. The city boasts 1,771 licensed financial institutions, including 548 foreign-funded institutions, accounting for over 30 percent of the total.

In 2023, the total trading volume of Shanghai's financial markets reached a new high of 3,373.6 trillion yuan, ranking first in the world.

Business environment

Shanghai is continuously enhancing its business environment for financial businesses, elevating its influence as a financial center.

It has strengthened its regulatory capability to manage industry risks by issuing regulations such as the Shanghai Municipal Financial Supervisory and Regulatory Regulations, as well as supporting rules and administrative penalty procedures.

A local financial supervision information platform has been launched, and a joint conference system for financial stability and coordination has been established to effectively handle major financial risk cases.

The city is also advancing the development of a sound financial legal framework, as evidenced by the implementation of Several Provisions on the Development of Green Finance in Pudong New Area and Several Provisions on Promoting the Development of Financial Leasing in Pudong New Area. The influence of the Shanghai Financial Court and the Shanghai Court of Financial Arbitration has continued to grow.

The visibility of Shanghai's financial brand is expanding globally. The Shanghai Financial Innovation Award has recognized many innovative financial projects in the city, while the Lujiazui Forum has become a key platform for high-level domestic and international financial dialogues.

Efforts to attract world-class financial talent are accelerating, with nearly 500,000 financial practitioners in Shanghai.

History and goals

Recognized as the birthplace of China's modern financial industry, Shanghai has been pursuing its goal of becoming an international financial center as part of the national strategy since 1992.

By 2020, it had transformed into an international financial center commensurate with China's economic strength and the global status of the renminbi.

Recent efforts to solidify Shanghai's financial center status have greatly supported the country's economic and social development, as well as its financial reform and opening-up. The city's financial sector has seen a steady increase in internationalization.

As outlined in the 14th Five-Year Plan for the Shanghai International Financial Center (2021-25), Shanghai aims to significantly enhance its status as an international financial center by 2025. The financial sector will play a key role in supporting the high-quality development of the national economy. Additionally, Shanghai's position as a hub for renminbi-denominated financial asset allocation and risk management will be further consolidated, while its capability for global resource allocation will be significantly strengthened.

These efforts will establish a solid foundation for Shanghai to achieve its substantial global influence as an international financial center by 2035.

 

Updated: April 12, 2024

Sources: Shanghai Municipal Financial Regulatory Bureau, 2024 Shanghai Basic Facts