The Chinese government has issued a plan to further open up Pudong in the financial sector, and for it to serve as a strategic link between the domestic and international markets. Experiments will first be conducted in Pudong to allow qualified foreign institutional investors (QFII) to participate in the issuance and trading of stocks on the technology-focused STAR Market. An international trading and pricing center for oil and gas will be established in Pudong, the guideline said. Zhang Hong, Director of the Pudong Finance Bureau, said more international products will be rolled out at the Shanghai Futures Exchange, the China Foreign Exchange Trade System, and the China Financial Futures Exchange by the end of this year. Cross-border renminbi flow is stressed in the guideline. An offshore financial system which is in line with Shanghai’s position as a world financial center will be set up. Pudong is being supported in developing offshore renminbi trading while controlling risks.
“Companies and institutions planning to carry out onshore business in China will see their costs reduced. Renminbi will circulate more efficiently between onshore and offshore markets, which will help Shanghai to grow into a center for renminbi financial asset allocation and risk management,” said Mark Wang, President and CEO of HSBC China. Detailed measures, including advancing the infrastructure connect mechanism in Shanghai’s bond market and accelerating the overall reform and opening-up in China’s bond market in interbank and exchange trading, will make trading smoother and introduce more international investors into the Chinese bond market, he said. The financial infrastructure and mechanism will be completed in the following years, according to the guideline.
Li Feng, Professor with the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, said Shanghai’s financial industry can better serve the real economy with the latest guideline by making pricing and trading mechanisms more efficient, the China Daily reports.
The Global Times adds that the guideline also offers tangible benefits for research institutes by exempting import duties for equipment for research use. Companies in vitally important sectors – integrated circuits, artificial intelligence, bio-pharmaceuticals and civil aviation – will receive corporate income tax breaks for the first five years following the start of operations. The Pudong New Area should also set up a blockchain standard system for trade financing and conduct a pilot program for digital yuan. “One highlight is that the plan will build a special economic functional zone in Pudong that undergoes risk and pressure tests on the open economy,” Sun Yuanxin, Deputy Director of the Research Institute for the Shanghai FTZ at the Shanghai University of Finance and Economics, told the Global Times, noting that the entire Pudong area will become a special economic zone in the future. Shanghai aims to build itself into an international science and technology innovation center, financial center, trade center, shipping center and consumption center.