Walter Hutchens’ Blog

Earlier this month Beijing’s municipal government published a “guiding opinion” on promoting the development of the financial sector in the city (a Chinese press report about it is here, and one with more background here).

Beijing’s Xicheng District, where “Financial Street” (Jinrong Jie) is located—the area where, inter alia, the China Securities Regulatory Commission is based—earlier promulgated its own local policies on encouraging financial sector firms to locate in Xicheng (available here in Chinese).

It seems inevitable that Beijing, Shanghai and Shenzhen will compete to become China’s financial hub. But this doesn’t have to be a zero sum game, does it? Most US SEC employees are in DC, though they also have a good contingent in NYC where the NYSE, Nasdaq and the big investment banks are based. Meanwhile most options trading flows through the Chicago Mercantile Exchange. China’s financial sector may continue to shake out this way—with regulatory emphasis in Beijing but the exchanges and banks in Shanghai and Shenzhen. China is huge, so they could have more than one financial “center.”

But the China case is different because the exchanges are not really SROs and the financial sector is managed mainly through central-level policy making. Thus government planning, not organic growth through private ordering, seems to be the key venue for competition among cities to become mainland China’s “financial center.” Meanwhile, Hong Kong (and to a lesser extent New York) have some claim on the title “China’s financial center” in terms of raising capital through public offerings.

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Title of Beijing’s new “guiding opinion:” 《北京市人民政府关于促进首都金融产业发展的意见》Beijing shi renmin zhengfu guanyu cujin shoudu jirong chanye fazhan de yijian).