Eastern exposure: Laurence Yuen reports on how Shanghai plans to use the 2010 world expo to boost its credentials as a global financial centre.
| Author | Yuen, Laurence |
'Better city, better life" is the theme of the 2010 world exposition. The event is widely seen as an important step towards making Shanghai an international cosmopolitan financial hub--something that the city has been aiming for since the fourteenth Communist Party China national congress in 1992. The hope is that the six-month event will break the record of 64 million visitors set by Osaka's expo in 1970.
Capital for the project is divided into two categories: direct (equity) and indirect (market finance). The aim is to attract five to ten times as much indirect capital as equity, it's estimated that the expo could raise a total capital of 24bn yuan (1.7bn [pounds sterling]). The city also hopes that further investment will be attracted into expo projects equating to between five and ten times the initial capital. If we assume a multiplier effect of 100 per cent over the life of the project, the total could exceed 400bn yuan.
The Office of Shanghai Financial Services has formulated a policy document called "The action framework of building up Shanghai as an international financial centre". This paper puts together a three-step strategy:
* From inception to 2005: establish the foundations of a financial centre.
* From 2006 to 2010: form the basic framework of an international financial centre.
* From 2011 to 2020: establish an international financial centre.
Shanghai considers New York and London as role models in this regard. These cities have established reputations based on openness and transparency; government support; high-quality funds and assets; advanced banking procedures and information systems; and highly educated financial managers.
One of the most important criteria for an international financial centre is foreign exchange control. Nobel economic laureate Robert Mundell has argued that a change in currency regime would cause "damaging" volatility. Chinese officials, while saying that their long-term goal is a more flexible exchange rate mechanism, have consistently resisted pressure for a quick move, arguing that the financial system is still immature and fragile. But perhaps China could adopt a more flexible system for exchange rates before it relaxes its strict forex control. This is an issue that Shanghai needs to tackle if it's to become an international financial centre. Some experts predict that forex control could be released by about 2010.
It seems, therefore, that the Shanghai expo will be a great investment...
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