Liang Hongfu

Stay tuned for Shanghai growth story

By Hong Liang (China Daily)
Updated: 2007-06-19 07:09

This is the best of times to be a business reporter in Shanghai.

The city is home to a sizzling stock market that yields a rich crop of stories. The stock market, though hoarding the limelight for months, has not entirely overshadowed other more subtle, but no less important, developments that promise to propel Shanghai into a financial center of international status.

In line with the government development blueprint, the Shanghai Futures Exchange is making significant progress in preparation for the launch of the proposed index futures market later this year.

It has been conducting mock trading sessions for nearly a year to help familiarize market intermediaries and potential investors with the planned rules and practices. The process also has provided valuable lessons in helping the exchange to fine-tune the draft codes.

The exchange also plans to introduce trading in a variety of derivatives futures that can provide the tools for the domestic and foreign financial institutions to create wealth management products specifically designed to meet the particular needs of different categories of investors.

Indeed, the lack of innovation in the domestic financial sector has been attributed, at least partly, to the absence of an active market for derivatives trading.

It is also part of the government's overall economic plan to expand the liquidity and scope of the commodity futures market by adding new products and opening the market, partially at first, to foreign participants. The recent opening of the Shanghai gold exchange membership to five major foreign banks was widely seen as a concrete move in this direction.

Shanghai's position as the financial capital of the nation is further assured by its hosting the China headquarters of nearly all major foreign banks, including those that have secured approval to establish registered subsidiaries.

With all these stories unfolding, Shanghai is, without doubt, the place to be for any conscientious financial journalist. It reminds me of what Hong Kong was like in the late 1970s when I was a reporter for a US business newspaper.

One of the biggest challenges we faced each day was deciding what not to write. With so many stories vying for our attention, making the pick was always a weighty editorial decision in a highly competitive market serving a very discerning readership.

When we got calls in the middle of the night from editors asking us how the events we reported fit into the larger economic picture, we knew it was time for some serious reflection on how these seemingly unrelated pieces of news fit together to form a new economic mosaic.

Like Hong Kong, the development of Shanghai into an efficient financial center is going to be the sum total of a multitude of events and factors, which may include market reforms, mega corporate mergers and acquisitions, the influx of foreign banks and other financial institutions, improved regulatory supervision and, more importantly perhaps, constant innovation by the increasingly active private sector.

As the Hong Kong experience has indicated, there is no guarantee that progress toward financial stardom won't be thrown off track every now and then by the occasional tremor that can be as unsettling as a stock market collapse, a spectacular corporate failure or a banking crisis. But Hong Kong recovered from all sorts of financial calamities and emerged every time looking stronger and more mature than before.

That was the Hong Kong story we loved so much. We are sure the Shanghai story is going to be even more exciting in scale.

E-mail: jamesleung@chinadaily.com.cn

(China Daily 06/19/2007 page10)