* SHANGHAI * 上海

big-dog said:

Thank you Skymyhusband.

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Skybean said:

Shanghai

source: http://www.flickr.com/photos/tangwhisky/sets/72157603657994157/

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LINK TO THE WORLD: Shanghai will become an international shipping hub in the next decade. Pictured here is the Shanghai Port International Passenger Transport Center (JIN RONG/CFP)

An economic center, a financial center, a shipping hub, a manufacturing base and an international metropolis—each of them once served as the name card for Shanghai on China's prosperous eastern coast. But most recently, the city has adopted a new orientation—becoming an international financial center and shipping hub.

On April 29, the State Council promulgated the Proposals for Promoting Modern Services and Advanced Manufacturing Industries and Building International Financial and Shipping Centers in Shanghai. According to the proposals, China is aiming to make Shanghai an international financial center in accordance with the country's economic strength and the international status of its currency as well as a global shipping hub able to allocate international shipping resources by 2020.

From now on, Shanghai will work out an implementation plan and clarify specific measures and annual timetables to complete major tasks to ensure it reaches this goal by 2020, said Yang Xiong, the city's vice mayor, at a press conference on the same day the State Council released the proposals.

"Shanghai is the most qualified metropolitan city on the Chinese mainland to pursue the ambition of building international financial and shipping centers," Liu Tienan, Vice Minister of the National Development and Reform Commission (NDRC), said at the press conference.

Well-positioned

Shanghai boasts the most developed financial and shipping industries on China's mainland. Last year the city's financial industry generated added value of 144.26 billion yuan ($21 billion), a 15-percent increase over 2007. It is home to the largest number of financial institutions in China, which stood at 689 at the end of 2008. Of that, there were 124 commercial banks, 291 insurance companies and 94 securities companies. Of the total, 165 were foreign companies, and 57 had been licensed to offer renminbi-denominated services.

The Shanghai Stock Exchange, the first of its kind in China, was established in 1990 and had the world's seventh and Asia's second largest turnover in 2008. Earlier this year, Shanghai was selected as one of the five cities for a pilot program that uses the renminbi to settle cross-border trade.

The Shanghai port is one of the world's busiest ports. Its cargo throughput had been the world's largest since 2005, and reached 582 million tons last year. It also handled 28 million standard containers in 2008, ranking second in the world.

Shanghai's customs reported a total of $606.6 billion worth of commodity imports and exports last year, up 16.3 percent. Of that, imports increased by 10.3 percent to $213 billion, and exports rose 19.9 percent to $394 billion.

The pursuit of the "two centers," according to Yang, would give full play to Shanghai's comprehensive strengths, promote industrial upgrading, help transform Shanghai's development, and enhance its overall competitiveness and service functions.

The goal of turning Shanghai into a financial and trade hub is not new. Back in 1991, late Chinese leader Deng Xiaoping pointed out during a trip to Shanghai that China would have to rely on Shanghai to play an important role in the global financial arena. The following year, the 14th National Congress of the Communist Party of China adopted a goal of making Shanghai one of the country's international economic, financial and trade centers as soon as possible to promote the development of the Yangtze River Delta region and the cities along the Yangtze River.

Last July, the NDRC, related departments of the State Council, and the Shanghai Municipal Government mapped out a blueprint on how to promote the development of modern services and manufacturing in Shanghai and turn the city into an international financial and shipping center. The State Council approved the roadmap on March 25.

The plan's implementation is key to Shanghai's long-term development and economic transformation. More importantly, it reflects China's determination to advance further reform and opening up and industrial structure upgrading, and to continuously enhance the industrial competitiveness and overall national competitiveness despite the ongoing financial meltdown, Liu said.

Challenges ahead

Shanghai still has a few obstacles to overcome to become an international financial center, said Yang Tao, a researcher with the Institute of Finance and Trade Economics under the Chinese Academy of Social Sciences. First of all, most of China's national financial institutions are headquartered in Beijing, which, together with the imperfect securities markets has hindered Shanghai's pursuit of its goal, he said.

The Central Government has been very prudent in promoting the reform and opening up of the financial sector in terms of market-oriented interest rate and exchange rate reforms, the introduction of more financial derivatives products and the free convertibility of the renminbi. Yet it fears all this could create more risks within the financial system. This could be the largest obstacle, Yang said.

Liu Shijin, Deputy Director of the Development Research Center of the State Council, said Shanghai has to prudently address its relations with the entire Yangtze River Delta and other major cities. Located at the end of China's largest river, the Yangtze River, and the middle of China's only coastline, Shanghai enjoys several geographical advantages. The city has shouldered high expectations from the Chinese Government and ordinary people that it could help the delta region as well as the whole country to develop.

While pursuing its goal, Shanghai will rival Hong Kong—already a mature international financial and shipping hub. Shanghai and Hong Kong target different groups of customers, and they are at different levels in terms of financial sophistication and shipping scale, NDRC Vice Minister Liu Tienan said.

Hong Kong's status as an international financial and shipping center would not be replaced in the short term, and Shanghai could learn from its example for quite a long time, said Tu Guangshao, another Shanghai vice mayor.

"The best ending would be for both Hong Kong and Shanghai to develop based on reciprocal benefits," he said.

Liu Shijin also pointed out that Shanghai has to determine what the relationship between its advanced manufacturing sector and modern service sector will be. It already has developed secondary and tertiary industries, but has not yet decided which one will be its dominant industry, Liu said. While the pursuit of the "two centers" will definitely offer a boost to the service industry, the government proposal also emphasizes the importance of making full use of its advantages in manufacturing to support the service sector, which poses great challenges for Shanghai.

Although the city has led China's economic growth in the past three decades, its economic growth slowed down last year and was much lower than the country's overall average growth rate. Nevertheless, Shanghai would seize important opportunities for economic revival by pursuing its "two centers" goal for greater and longer-term focused achievements, Liu said.

Measures to Make Shanghai an International Financial Center

—Develop a multifunctional and multilayer financial market in Shanghai with the introduction of more financial products, instruments, derivatives and futures;

—Gradually increase the volume of yuan-denominated bond issues by international development agencies; steadily work to allow foreign companies to issue yuan-denominated bonds in Shanghai; and permit some foreign firms to be listed on the Shanghai Stock Exchange at an appropriate time;

—Encourage development in some sectors, including finance software research and development, financial information, accounting and auditing, investment consulting and financial legal services to improve services for financial institutions.

Measures to Make Shanghai an International Shipping Hub

—Continue to improve the infrastructure at the Shanghai port whileBintegrating neighboring resources in the Yangtze River Delta;

—Promote shipping services by lowering transfer costs for containers from around the world while striving to enhance the competitiveness of domestic shipping firms;

—Extend the deadline of tax shelters for domestic ships under flags of convenience from June 30, 2009, to June 30, 2011, and possibly initiate tax rebates for ports of departure;

—Allow major domestic shipping companies to set up financial leasing firms and actively and steadily encourage such firms to trade and issue bonds on the Shanghai-based interbank market;

—Allow international cruise operators to register and establish agencies in Shanghai to operate approved international cruise lines.

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