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Highlights of September 15 Press Conference on development and future planning of building Shanghai into an international financial center

Fang Xinghai, director of Shanghai Financial Service Office

HKTV: Hi Mr. Fang. You just talked about coordinated efforts to develop RMB-based financial markets in Shanghai and Hong Kong. Could you be more specific about what measures will be taken to develop the markets? 

I’ve another question. Vice Premier Li Keqiang expressed his support for the growth of the RMB market in Hong Kong when he visited the territory last month. Do you think Shanghai is earnestly making contributions to the financial market? Are Hong Kong and Shanghai big competitors in financial services?

Fang Xinghai: I’ll give an example of the good cooperation between Shanghai and Hong Kong in promoting the RMB market. As we know, Vice Premier Li Keqiang voiced his support to develop the RMB bond market in Hong Kong for qualified foreign institutional investors and to sell an initial 20 billion yuan of treasury bonds. This best shows the cooperation between the two cities to promote RMB because most QFII investors want to invest in Shanghai’s financial market. We will increase the QFII investment quota if the initial sale goes well.

With the growth of the offshore RMB market in Hong Kong, there will be an increasing demand to invest in mainland stocks and futures markets, and most of these markets are in Shanghai. We welcome RMB investment from abroad. We’re also making efforts to perfect our financial market to make it more suitable for foreign investors.

About the competition in your second question, I don’t think there’s any rivalry between Shanghai and Hong Kong in developing RMB business. It’s definitely a complementary and cooperative relationship. Because the sooner the RMB becomes an international currency, the better it is for Hong Kong and Shanghai and the entire China. As I have said, we will promote the internationalization of RMB together with the Finance Department of Hong Kong.

CCTV: Two questions for Mr Fang. First, you just said that the main task for the next period is to speed up the growth of the bonds market. Are there any specific measures? Second, you mentioned that Shanghai is cooperating with the China Insurance Commission to establish an insurance exchange. What is the progress of its preparation and do you have a schedule?

Fang Xinghai: In financial centers around the world, a bond market is always bigger than a stock market in scale of transaction. But in our country, the bond market is falling behind the stock market in development. There is a huge potential for it. We’ll take two measures: first, offer more and better bond issues; second, attract more middle- and long-term institutional investors.

We have got some good advices. We believe that if more foreign organizations issue RMB-denominated bonds in Shanghai, it will not only benefit China but also relieve them of financial burden. The city government thinks that it is good our country and for the world financial system if more foreign organizations issue RMB bonds in Shanghai.

We also see great potential in domestic institutional investors. We think we can invest the surplus of the social insurance fund in the bond market. It is feasible for some provinces with a lot of surplus. Unfortunately, Shanghai has no surplus because we have already entered the aging society.

Regarding the insurance exchange, we have already discussed with the China Insurance Commission and we’re going to form a team to initiate the project.

China Economic Weekly: Two questions for Mr Fang. You said Shanghai would attract more foreign bond issuers and take advantage of the current situation of the world economy to induce more foreign enterprises to list in China’s stock markets. Would you please elaborate how current world economy can benefit the international board?

Second, you said that some market-related state administrations should be located in Shanghai, for example, the central bank has numerous departments in Shanghai. Do you mean, in the future, more such agencies will move to Shanghai.

Fang Xinghai: As we know that many Western countries are undergoing economic adjustment. The financial industry is in a difficult time. Corporate financing is getting worse. We learned that some healthy multinational companies very much wish to get listed in the international board and issue RMB shares because it will be a new funding channel for them, and it can also promote their business in the country.
I think it is a good opportunity now to invest in international companies through the domestic stock markets and it is a good way to make our surplus funds international.

On your second question, the State Council circular No. 19 has said clearly that the central government should establish an inspection system where the market is so it can keep a tap on market changes and react swiftly to avoid risks. We think Shanghai is the ideal choice.

Taiwan Want-Daily: A question for Mr Fang. You outlined earlier the targets of the Shanghai financial center during the 12th Five-Year Plan period. But with the soaring unemployment rate in the United States and the sovereign debt crisis in Europe, the global financial market is looking bleak. I’d like to know if the disturbing situation will affect our plan for the construction of the international financial center?

Fang Xinghai: We believe the current global economic situation is positive for Shanghai’s construction of the international financial center. Our market-opening policies have received good responses from many foreign companies who are willing to come. However, we also believe that some Western countries are struggling with their debts and unemployment but they’re in the process of economic readjustment. The global economy will eventually recover and we will have more interaction with overseas markets.

Wenhui Daily: Mr Fang, the next step Shanghai will take is to expand the trial of the foreign currency settlement center. Eight enterprises in the city’s free trade zone have used the services at the center. What is the scale of this expansion?

Fang Xinghai: The reform of the international trade settlement center is aimed at making Shanghai a real international trade center and at reducing limitations of foreign exchange administration. Eight enterprises in the free trade zone were involved in the experiment from last September to this July and the result is positive and encouraging. But I can’t tell you how many enterprises will be involved in the next stage of experiment because it needs to be approved by the State Administration of Exchange Control.