Burgeoning bids to be 'finance centers'

(China Daily)
Updated: 2012-01-19

Editor's note: Experts discussed regional development at the 21st Century Annual Finance Summit of Asia.

Du Yan, director of the Finance Section at the 21st Century Business Herald and host of the forum discussions: A "financial center" has become the buzz word for the development plans of many local governments in recent years. How do you see this phenomenon?

Yang Zaiping, standing vice-president of China Banking Association: Indeed, I learned that over 20 provinces and local regions of China have listed "building the region into a financial center" as their development goal.

It's impossible for all these goals to be accomplished. A city should meet an array of requirements to become a financial center: there should be many financial institutions, a large volume of trading, along with corresponding infrastructure and facilities.

Zong Liang, deputy director of International Finance Institute of the Bank of China: It's not unlikely for a region of a reasonable size to have more than one financial center.

But the number should not be too big. These financial centers should target markets of different levels and maintain complementary functions.

Du: Tianjin is also striving to transform into a regional financial hub. How can Tianjin become more attractive to financial investors?

Zhang Qingxiu, manager of the Beijing branch of China Bohai Bank: A financial center, with its trading and service functions, naturally lure sellers, buyers and service users from the surrounding area.

A city could not become a regional financial hub without recognition from neighboring regions.

Tianjin, a port city, enjoys some influence, but faces difficulties for the municipality to compete against Shanghai as a financial trading center.

Jin Jian, chief economist and partner of Deloitte: Yes. Financial centers should not be self-proclaimed.

Some cities line up banks in one or two streets and dub them as "financial centers".

It should be known that banks alone are unable to make for a financial center. It requires the involvement of many financial and investment institutions such as securities companies, insurance companies, and futures companies and so on.

Du: Many regions have more specific goals. Southwest China's Yunnan province, intends to become "a regional financial center oriented towards Southeast Asia", and Xi'an, capital of Shaanxi province seeks to be the financial hub of West China. What should be the appropriate orientation for them?

He Jia, professor of the Department of Finance of The Chinese University of Hong Kong: Their understanding of a "financial center" is rather vague.

Many have put forward this idea only to attract funds. Real economies in these areas have a long way to go to enhance its overall strength, so they count on financial development to boost their local economies.

Du: Harbin, capital of Heilongjiang province, envisages itself to be a financial center of Northeast Asia.

Yin Liguo, general manager of Investment Banking Department of Harbin Bank: In the 1920s and 1930s of the last century, Harbin used to be a financial center. It's important for a city to find its unique advantages through market segmentation.

Du: Will these measures by regional governments encourage local financial development?

Yang: Before 1998, government interference in the banking sector was severe.

Later to avoid risks, commercial banks severed relations with government agencies. Now governments have once again shifted emphasis on the financial sector. This time, they should avoid direct political interference and focus on providing infrastructure and creating a favorable market atmosphere, particularly a healthy credit environment.

Du: Now governments are imposing tight curbs on money and credit supply.

Local economic development however should be fueled by investments from banks. How to strike a balance between these two and what should be the primary objective of regional financial development?

He: Liquidity risks can be greatly reduced if governments, enterprises and banks work together.

Financing of local businesses should not be a big issue if governments do more channeling.

The big question is where to channel the money?

Regional financial development should serve emerging industries that contribute to the overall competitiveness of China.

China Daily

(China Daily 01/19/2012 page17)