Asia’s International Trading and Finance Centres
Edited by François Gipouloux
14. Evaluating Beijing and Shanghai as global financial centers1 Xu Xun and Meng Jianjun After China’s entry into the WTO, one of the most frequently asked questions is whether Beijing or Shanghai will become a global financial center (GFC). In this chapter we attempt to answer this question. A GFC is often backed by a robust and vibrant domestic economy. It occupies a central and dominant position in the international network of financial centers. By examining the current place of Beijing and Shanghai in China’s economic development and in the world financial system, we try to evaluate their roles as GFCs. Our conclusion is that Beijing and Shanghai are not qualified as GFCs at present and are unlikely to be in the near future. This is based on two reasons. First, although both cities are well-established national financial centers, they have been inefficient in fueling domestic economic growth. Without further reform, China’s financial system is likely to undermine the country’s future economic development. Second, compared with the world’s major financial centers, Beijing and Shanghai so far have very limited participation in the global financial businesses. Their further internationalization requires the liberalization of China’s capital account. This, however, is not plausible in the short run, given that China’s financial sector is still at an early stage of development. This chapter is ordered as follows: the following section provides an overview of China’s economic and financial development. Then we examine the position of Beijing and Shanghai in the overall economy, and assess...
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