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Shanghai FTZ develops a new system for financial innovation in five years

December 03,2018

   
   

Shanghai (Pilot) Free Trade Zone has formed a new financial innovation system that features an effective risk prevention mechanism and suits a more open environment after five years of development.

In addition, the zone has developed a coordination instrument to support the city’s endeavor in building itself into an international financial center.

As a beneficiary of the zone’s preferential policies and the first domestically-funded financial leasing enterprise in the zone’s Lujiazui area, Shanghai Shenneng Financial Leasing Co has established strategic cooperation with many financial institutes, acquiring 12 billion yuan (US$1.73 billion) in credit lines.

The company also signed financial leasing contracts worth 7 billion yuan with Shanghai Shenneng New Energy Investment Co, Shanghai Gas (Group) Co, and nearly 20 other companies. Xie Feng, CEO of Shanghai Shenneng Financial Leasing Co, said that the reason why the company can achieve all these in just one year after its founding lies in the FTZ’s platform and its policies.

As one of the zone’s policy innovation, the free trade account has benefitted many international companies. They thought of the free trade account system as a highway where there are not only surveillance cameras but also many service stations and gas stations, which will let more cars be willing to run on the highway instead of much smaller lanes in the country.

The free trade accounts enable international companies to have the functions of international treasury management center, realizing rationing capabilities of international capitals and financing management. Such as the two-way cross-border RMB cash pool CitiBank has created for Aland Group, which is the first time that an international company opened a free trade account to carry out international capital and financing management.

By the end of June of this year, 56 commercial banks, finance companies, and securities companies had directly docked with the free trade account system and they opened over 72,000 such accounts, through which they had acquired domestic and foreign financing worth 1.25 trillion yuan.

With the city’s financial industry’s continuous expansion, the FTZ’s financial ecological circle has also grown, especially bringing forth many emerging global assets management giants in the Lujiazui financial area.

Under the framework of the “negative list” and with growing opportunities of expansion of the FTZ’s trans-border assets management businesses, Aberdeen Asset Management Limited PLC has solely invested in Aberdeen Standard (Shanghai) Investment Co in Lujiazui, which has become the country’s first foreign asset management institute.

Since then, more foreign assets management have followed suit and accelerated their pace in setting up entities in the FTZ. As of now, 39 globally-renowned assets management companies have set up 57 solely-invested assets management companies, including the top 10 global assets management companies such as BlackRock, Vanguard Investment Management (Shanghai) Limited and Fidelity Investment Group.

With the establishment of the cooperation mechanism and the city’s efforts in building itself into an international financial center, a batch of financial markets have emerged, further enhancing the city’s core financial resources distribution. Meanwhile, functional financial infrastructures serving the international factor markets have emerged, and the zone’s financial services’ real economies and their capabilities and efficiency to serve domestic and foreign financial markets have been strengthened.

The establishment of the Shanghai Insurance Exchange has docked domestic and foreign insurance exchange markets, and influenced Shanghai’s regional reinsurance trades and pricing centers. On the other hand, China Trust Registration Co helped the formation of unified and efficient trust markets.

Last year, China Central Depository & Clearing Co Ltd set up its Shanghai Headquarters in the FTZ, integrating the functions of Renminbi Off-Shore Launching Centers, Cross-border RMB Bonds Settlement Center, ChinaBond Collateral Security Center, ChinaBond Valuation Center, and Shanghai Data Solution Center to serve the city’s efforts of building itself into an international financial center.

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