BIZCHINA> Review & Analysis
Making Shanghai a global financial centre
By Sun Lijian (China Daily)
Updated: 2006-09-21 14:26

Based on expectations for the future, investment decisions would be changed frequently. If the change is costly in a certain financial market, investors would automatically refrain from investing in this market.

A choice to cut down the trading costs in the financial market is to make full use of the market, exploring its functions as much as possible. Some effective means to facilitate circulation in the financial market include free exchange, a free capital market and allowing international players in the market.

Regional economic development around the financial centre also has a direct influence on the trading cost in the market.

A third factor for the appeal of a global financial centre is transparency.

Participants of the financial market have different motives. Investors purchase securities for better returns, businesses issue stocks for financing and security houses supply professional services for profit.

All of them need free information flow and transparency to achieve their specific targets. Otherwise, the financial resources could not be allocated efficiently or fairly.

The fourth indispensable factor in a global financial hub is a reliable legal system strong enough to check the financial speculation.

As financial globalization deepens, the activities in a financial market become increasingly comprehensive and beyond the reach of common individual investors.

Institutional investors have created prosperity in regions where global financial centres are located with their unprecedented active businesses in recent years. Meanwhile, their investment activities also caused crises in many other places.

It is not rare to see that institutional investors sacrifice the interests of other investors or stability in other countries for their own benefit. A typical example of this is the Southeast Asian financial crisis in 1997.


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