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A Capital Idea

Beijing aims to become the country’s financial management hub to improve regulation and better serve the financial industry. But what is that going to take?

By NewsChina Updated Apr.1

For decades, Beijing has vied with Shanghai for the status of China’s financial center. Their rivalry ramped up recently after Beijing released an ambitious plan to become the country’s financial center and financial management hub. 

In late October 2018, the city unveiled its Financial Technology Development Plan 2018-2022 (FTDP), which aims not only to attract international firms and talent but also to create financial 
innovation clusters. 

“As the financial hub for China’s regulatory authorities, Beijing is already the nation’s de facto financial management center,” said Zhao Weijiu, research institute director at the Beijing Municipal Bureau of Financial Work, which authored the plan with the Beijing Municipal Science & Technology Commission. “Beijing will keep merging this role and position.” 

Zhao said Beijing aims to create a better financial environment for the integrated Beijing-Tianjin-Hebei region, while playing a bigger role as a regulator and service provider in the national financial system. 

Financial Ambition
 The FTDP seeks to create five to 10 internationally renowned enterprises, three to five innovation clusters, and launch 10 to 15 projects by the end of 2022. Over the years, Beijing has positioned itself as the center of politics, culture, international trade and sci-tech innovation. Development of the fintech sector is a crucial step in building up the capital as a sci-tech center. 

According to the plan, Beijing will create fintech innovation zones in Xicheng and Haidian districts, a banking and insurance tech cluster in Shijingshan District, a financial security industry cluster in Fangshan District, and a wealth management industry cluster in Tongzhou District. 

During the 2018 Annual Conference of the Financial Street Forum in late May 2018 held in Beijing, Mayor Chen Jining announced that finance had become the city’s pillar industry, accounting for 17 percent of its economic growth in 2017.  

According to the development plan, the capital’s financial sector will be at the forefront of China’s efforts to attract world-leading financial talent. A national financial management center will be based on Xicheng District’s Financial Street, a center for big data and cloud computing companies. 

Today, Financial Street is home to China’s central bank and major financial and insurance regulators, as well as over 1,800 financial institutions and headquarters of State-owned enterprises with assets totaling 99.5 trillion yuan (US$15t), accounting for nearly 40 percent of the country’s financial assets. 

According to the Xinhua International Financial Center Development Index Report 2017, Beijing ranked 10th on the global financial center list after Hong Kong and Shanghai. The Global Tech Hubs Report released by New York-based research firm CB Insights in 2018 noted that Beijing and Shanghai were among the world’s top 25 tech hubs. 

Over the past six years, sci-tech companies in Beijing registered a total financing of US$72 billion, ranking second worldwide (and over three times that of Shanghai).  

According to data from CB Insights, at least 29 unicorn companies sprang up in Beijing during that period, including smartphone maker Xiaomi, car hailing service Didi Chuxing, and group-buying website Meituan, placing the city second worldwide according to volume.  

“Our research shows that Beijing has the highest market value of listed financial institutions, securities and insurance companies worldwide,” Ben Shenglin, director of the Academy of Internet Finance, Zhejiang University told NewsChina. Ben added that Beijing is home to a large number of overseas institutions and transnational enterprises, including the Asian Infrastructure Investment Bank and Silk Road Fund, which attests to Beijing’s unique advantage as the national financial management center. 

“In the future, Zhongguancun, a technology hub in Haidian, and Financial Street in Xicheng will further integrate resources. The fintech industry will be the unique bond to connect the two sectors,” Wang Aijun, director of the Zhongguancun Xichengyuan Management Committee, told our reporter. 

“In terms of financial innovation, Beijing still needs to work hard to cut administrative intervention and give full play to entrepreneurs and the market while unveiling more measures to open the financial sector,” Xiang Songzuo, deputy director of the International Monetary Institute at the Renmin University of China told NewsChina. “Beijing has great fintech infrastructure with great potential if stimulated.” 

Many banks and insurance companies have their headquarters on Financial Street, Beijing’s Xicheng District

New Roles
Shanghai has taken the spotlight for years in China’s financial industry thanks to its bulk of financial enterprise clusters, placing it in a unique position among international financial centers. Hong Kong’s financial industry is largely based on the HSBC Group, Bank of China Group and foreign banks, making it one of the world’s leading banking centers. 

Ba Shusong, chief China economist of Hong Kong Exchanges and Clearing Limited, argued that Shanghai and Hong Kong have different development orientations and strengths. “Hong Kong as a global financial center mainly features international competition,” he told NewsChina. “Shanghai features cooperation which has advantages to meet domestic demand and a focus on servicing the real economy.”  

Shanghai and Hong Kong also have geographic advantages: Both are in coastal areas where foreign financial trade has flourished. However, sci-tech resources turned out to be the pillar of Beijing’s financial sector. “China’s financial centers of Shanghai, Hong Kong and Beijing have to coordinate their development and avoid vicious competition for financial resources,” Zhao Weijiu told the reporter. Zhao argued that Beijing has its own unique advantages, such as Financial Street and leading Chinese universities in nearby Haidian District. 

Ben believes that fintech is important to the development of Beijing’s financial industry. “Nowadays, both Shanghai and Hong Kong are focusing more attention on traditional financial industries compared with Beijing,” he said. 

Ben argued that in recent years there has been a growing demand for financial regulation and services as China increasingly opens the industry to the outside world. However, China’s regulatory capabilities are not up to the task, and urgently need strengthening if Beijing is to fulfill its ambition to become the country’s financial management center. 

On October 22, 2018, BMBFW issued a directive to boost fintech innovation and improve coordinated mechanisms in financial regulation while establishing channels of international cooperation and communication. 

“A secure financial system is the foundation of a steady economy while a secure capital is the precondition for a secure country,” Mayor Chen Jining said during the Annual Conference of Financial Street Forum in late May 2018.  

According to the FTDP 2018-2022, Beijing will actively introduce new technologies to prevent financial risks before establishing the national modern financial regulatory system. 
“The national financial management center in Beijing is dedicated to balancing financial resources and improving the financial system in China,” Zhao Weijiu told NewsChina. He pointed out that China’s financial center [Shanghai] and financial management hub are far from each other, while in many countries they are in a single city. 

Nevertheless, Zhao said China’s history of financial development is complicated and China is unlikely to succeed if it copies the development of other countries. 

“Beijing will become the financial management center after borrowing experience from other countries and integrating it with China’s own circumstances,” Zhao said. “China will find its own path to develop its financial industry.”