SEATTLE - Shanghai Vice-Mayor Tu Guangshao said the next five years will be key in realizing Shanghai's ambition to become an international financial center by the year 2020.

"If we cannot set up a basic pattern in the next five years, it will be difficult to achieve the goal in 2020," Tu told reporters on Tuesday on the sidelines of the three-day US-China Initiative on City-Level Economic Cooperation that ends on Wednesday.

Under a blueprint laid out in April 2009 by the State Council, China's Cabinet, Shanghai should become an international economic, trade, financial and shipping hub by 2020.

Tu, who has held key positions in the People's Bank of China, the central bank, China Securities Regulatory Commission and was once head of the Shanghai Stock Exchange, said the key to building a global financial hub is to establish a "relatively" open financial market system.

To build the financial hub, Shanghai will strive to attract various financial institutions. Tu said the companies should be influential globally, operate according to international norms and effectively utilize both domestic and international resources. Shanghai is currently home to about 1,000 financial institutions.

Tu said he believes that a financial hub is a place where every financial products and tools should be able to play out their roles. He emphasized building a system attractive to financial professionals as well as building an environment conducive to financial development, such as a credit system and a system that encourages financial innovation.

It will be a financial hub comparable to China's national strength and the status of its currency, Tu said.

He acknowledged that realizing the vision will not be easy.

"Tough challenges that are expected during the process in areas such as financial and taxation systems should be overcome through innovation," he said. "We should develop and move forward through innovation and we should achieve our 'four hub' target through innovation," said Tu, who was leading a 70-member Chinese delegation comprising government officials and entrepreneurs to the northwestern US city.

He expects Shanghai to make improvements in the regulatory regime and legal sector during the 12th Five-Year Plan (2011-2015), citing Shanghai government rules announced in 2009 to speed up legislation and to attract talented professionals.

Chinese financial analysts have praised Shanghai's progress in establishing itself as a financial hub over the past two decades, especially in expanding its stock market, its bond market as well as the futures market.

However they voiced strong concern over the fact that a still unconvertible renminbi and the government control of its flow in and out of the country will serve to dampen Shanghai's financial hub ambition.

While the Shanghai Stock Exchange routinely has a higher trading volume than the exchanges in Hong Kong and Singapore, it is widely seen as less transparent, saddled with fewer regulations and not as investor friendly.

The good news is that China has established a more flexible exchange rate system last year and more freedom has been granted to selected institutional investors in handling the fund flow.

Shanghai has talked about rebuilding its financial center for the past two decades. The city has strived to compare itself with cities such as New York, London and Hong Kong.

Its ambition has received a strong shot in the arm after being sanctioned by the State Council in April 2009. When a statue of a bull was unveiled on the city's waterfront last May, local district leader Zhou Wei described the bull as being younger and more energetic than the one on the Wall Street. Both bulls were designed by Italian-American Arturo Di Modica.

China Daily

(China Daily 04/20/2011 page15)