Shanghai has been urged to build itself into a hub serving the rising outbound investment needs of Chinese firms, potentially increasing rivalry with Hong Kong as both cities race to augment their status as financial centres. The suggestion by Liu Xiaochun, vice-president of the Shanghai Finance Institute and a senior banker with three decades of experience, was made in mid-June at a closed-door meeting hosted by China Finance 40, a Beijing think tank comprising many top Chinese financial regulators, bankers and academics.
“Just as American multinationals expanded globally with New York as their financial anchor, China’s outbound firms face a phenomenon shaped by unique international circumstances, and cannot rely on financial centres in other countries,” said Liu, former head of Agricultural Bank of China’s Hong Kong branch and former president of Hangzhou-headquartered China Zheshang Bank, according to a transcript of his speech published last week. “China has Hong Kong, a mature international financial centre with the flexibility to respond to market changes, but that is not enough to fully meet the special needs of Chinese companies’ outbound expansion. In this regard, Shanghai needs to play a role.”
Hong Kong, which has the Greater Bay Area at its doorstep, a mature common law system and free capital flows, has long prided itself on being a superconnector that assists Chinese companies in expanding internationally. This includes expansion to both Western countries and the broader global market.
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Liu’s recommendations include developing legal services, security coordination, and localized financial tools, such as a corporate-treasury platform. These capabilities, he noted, cannot be easily replicated from Hong Kong’s existing infrastructure.
The city, supported by the Yangtze River Delta and home to more multinational regional headquarters than any other mainland location, has already received policy backing from the central government. Liu’s plan envisions Shanghai as a fundraising and investment center for Chinese firms going global, handling syndicated loans, bond issuances, asset-backed securities, share listings, and financial asset trading.
He also suggested creating a foreign exchange trading hub that avoids reliance on the dollar. This would involve partnerships between Chinese and foreign banks to build regional cross-border payment and settlement systems using digital technologies. Shanghai already hosts the People’s Bank of China’s digital yuan operation center and the Cross-Border Interbank Payment System, a centralized network for yuan transactions.
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Other proposals included setting up service centers for cross-border legal, arbitration, accounting, and management needs. Despite Hong Kong’s existing role in international mediation, Liu called for a rapid-response decision-making mechanism in Shanghai to address urgent issues.
The proposal highlights broader competition among Chinese cities for financial dominance. Whether Shanghai can deliver on this vision remains uncertain.
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