Pudong’s financial engine fuels Shanghai’s modern economy
Print Edition
EDITOR’S note:
This year marks the 25th anniversary of Pudong New Area’s takeoff since opening-up of the area as an economic zone started in 1990. Pudong, literally the east bank of Huangpu River, has realized a drastic change from an impoverished swampy farmland into a prosperous modern urban and economic area. Sea changes are happening as Pudong is always at the forefront of reform and opening-up. Shanghai Daily is running a series of stories to record the area’s 25 years of development and new growth opportunities ahead.
“Finance is very important, because it is the core of modern economy,” said Deng Xiaoping (1904-1997), China’s economic reform leader, when he visited Shanghai in 1991.
Deng was instrumental in the development of Shanghai and the Pudong New Area with a financial mission to revitalize China’s economic hub.
“When finance works, it is like a good move in a chess that can save the whole game,” Deng said. “Shanghai used to be a financial center, it was where currencies could be freely converted, and we will also do this in the future.”
He envisioned Pudong, literally the east side of the Huangpu River, to be this future.
The Lujiazui area, carved by a right bend of the Huangpu River and overlooking the financial legacy on the Bund, embodies the financial power of Shanghai.
In the past 25 years, the farm lands in Pudong were gradually overrun by urban structure while the modern financial sector thrives in the high-rise towers in Lujiazui. The transformation confirmed Pudong as China’s only state-level finance and trade development zone.
Pudong is now home to the Shanghai Stock Exchange, the Shanghai headquarters of the People’s Bank of China, and many of Shanghai’s best-known buildings, such as the Oriental Pearl TV Tower, the Jin Mao Tower, the Shanghai World Financial Center, and the Shanghai Tower.
Key component
Among the rows of high-rise towers in Pudong, more than 30 can each generate over 100 million yuan (US$16 million) in taxes each year. Companies in the largest of the buildings paid a combined 2.7 billion yuan in taxes last year, official data showed, without naming the building.
Led by the Lujiazui zone, Pudong has established itself as the key component of Shanghai’s financial ambition.
Results from Shanghai’s latest economic census showed that financial industries in Pudong have evolved into a pillar of the local economy. As to the end of 2013, the total assets of companies in the secondary industries and services industries totaled 21.33 trillion yuan, about half of that in the whole of Shanghai. Comparatively, total assets of financial institutions have exceeded 15 trillion yuan, nearly doubling that at the end of 2008 and comprising three-fourths of the Shanghai volume.
By the end of 2013 a total 665 financial corporations were set up in Pudong with financial professionals exceeding 200,000. Among the corporations, mainland companies took up 73.5 percent, foreign ones 20.4 percent, and the rest came from China’s Hong Kong, Macau and Taiwan.
Four largest state-owned banks have all set up their Shanghai management centers or headquarters in Pudong.
Shanghai already has the world’s largest physical gold market and handled more than 700 trillion yuan in transactions, excluding foreign exchange deals, last year.
Thanks to the recent bullish stock market, the total market value of companies listed on the Shanghai bourse was nearly 35 trillion yuan by the end of last week, on par with the Tokyo bourse and lagged only slightly behind Hong Kong.
New opportunities
The development has helped Shanghai establish its financial status by size.
The current ongoing financial reforms in the free trade zone are opening up new opportunities to drive toward a deeper and a more liberalized market.
Since the China (Shanghai) Pilot Free Trade Zone was established in September 2013, new financial rules have been released to allow freer cross-border money management and transactions in the zone.
A special system called free trade account opened for foreign companies and enterprises in the zone allows them to manage their onshore and offshore cash under a single account.
Since the system was introduced in June last year, new functions have been added gradually to include both local and foreign currency operations.
Financial institutions can now offer cross-border foreign currency services for trade and foreign direct investment for holders of the free trade accounts.
Companies, banks and brokerages will not need to apply for administrative approval to borrow from overseas under the special free trade account system used in the zone.
However, controls are still in place to monitor currency convertibility and transactions under the capital account, such as financial market investment.
A blueprint for the FTZ released in 2012 has envisioned financial reforms in the zone leading to currency convertibility under some capital account operations, a goal that Deng outlined more than two decades ago.
The regional experiment could soon further lift Shanghai’s status as a financial center as the size of the Shanghai free trade zone has quadrupled to cover the Lujiazui Finance and Trade Zone, Jinqiao development area and Zhangjiang High-Tech Park.
Yang Xiong, mayor of Shanghai, in January promised that Shanghai will continue to accelerate the construction of the free trade zone, making it a place for the introduction of new policies and a model for other recently established zones in the nation.
The zone’s work agenda includes better coordination between the zone’s development and the city’s ambition to become a global financial center, according to Yang.
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