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Shanghai vs HK as Next Generation Financial Centre

There has been a long-lasting discussion for one query: Among the 2 China metropolises Shanghai and H.K. (Hong Kong), which one will be the optimal financial center in China? For giving a suitable answer, we (China Sources Team) would remind that you should really explore some background of the two China cities first.

At late 1920s, Shanghai had still been the preferential financial center in Far East Asia region. What happened thereafter were the Japanese Invasion plus the Chinese Civil War which compelled numerous international enterprises to relocate their business by 1949 to HK (Hong Kong) from Shanghai. On this ground, HK speedily industrialised and further turned into a top financial centre in Asia gradually by a far more risk- free political climate. Shanghai, during the said period, fell into a time of historical forgetfulness. It was til 1992 when Deng Xiaoping, the most important and paramount leader of the reform in the nation, reaffirmed open-door policy and put up Shanghai to take back its lost reputation of financial hub.

After that, Chinese government firmly grasped this central task of economic construction when there was no large-scale foreign invasion. Government officials were determined to open its door wider for outside world in the 1990s, even though it would increase capitalist influence on the mainland and communist cadres. Beijing top leadership maintained many times during high-level meetings that central government must seize the golden opportunity to dismantle Soviet-style systems introduced decades ago and deepen its economic reform drive. Many senior Chinese government leaders, including politburo standing committee members, also started realizing that Soviet models did not meet the practical needs of PRC (People's Republic of China), and therefore stepped up their efforts to correct anything that should be corrected in late 1990s. They understood the importance of unswervingly sticking to the open-door policy since 1979 and foreign investors would not dare come if PRC government failed to put into practice their open-door policies. While they understood that there was a price to pay for greater open-ness, they knew it would work if it could help Chinese economy. Some PRC government leaders even believed that it was inevitable to have capitalist influences in the course of carrying out this open-door and reform policy. These were not to be feared even there would be some cadres in some internal departments who were not so firm on socialism.

While PRC central government had begun establishing a framework of Chinese-style socialism, Shanghai then subsequently built Pudong New Region, where foreign bankers and investors were conferred preferential conditions to do business in this evolving financial hub. With PRC's entry to WTO later in 2001, a lot of worldwide enterprises moved all or part of their Asian headquarters back to Shanghai. As of today, nonetheless, this Chinese city still applies vast numbers of banking regulations on financial products and non-renminbi trades. Foreign banks in Shanghai possess no choice but turn to transfer a minimum of their juristic division to their Hong Kong district offices. In reality, Hong Kong has a more unaffiliated jural system than Shanghai. Currently, China's financial centre in either Hong Kong or Shanghai does possess its own fascination. Some enterprises consider to list in Shanghai for greater political intention, cheaper listing fees, more speedy listing time, and bigger local currency (CNY) capital market. In addition, those companies can generally acquire better valuation in Shanghai listing.

Many other enterprises, nevertheless, still consider a listing in HK due to better global reputation. Their listing in H.K. (Hong Kong) can also enjoy better public perception and signify a more reliable corporate governance for the reason that listing criterions are believed more demanding in HK. Honestly speaking, though H.K. still possesses a more superior services sector than Shanghai, we (China Sources Team) know clearly that services industry in Shanghai is now developing very quickly and will come to be more rivaling. This growing trend is becoming more and more obvious, especially after its recent launch of FTZ (free trade zone) on September 2013. The above basically explains how Hong Kong and Shanghai compete for China preferred financial center.

As a brief conclusion, which of them will lastly win the competition to become the primary China financial centre, Shanghai or Hong Kong? We, China Sources Team, think that probably both of them should win, but how this can happen? You may locate our detailed answer at: Leading China Financial Centres published via this Great China Blog. Desperate to acquire more in regards to the financial centre development of H.K. (Hong Kong) and Shanghai? Please do not miss also: Chinese Financial Centres Competition for a more in- depth information.


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