Shanghai will become the world center of yuan trading, clearing and pricing by 2015, according to a new plan published by the National Development and Reform Commission. The plan will see the total value of financial market transactions nearly tripling to 1,000 trillion yuan (US$158 trillion).
With the new plan, Shanghai will be poised to enter the conversation as one of the key global financial centers for the 21st century, on the same level as New York, London and Hong Kong.
Reuters reports that the move is seen as an effort to exert greater control of the yuan:
Currency traders said the statement by the National Development and Reform Commission (NDRC) was also a message from Beijing that the yuan’s movements, which have increasingly been influenced by the offshore market over the past few months, would be decided by the government.
“There have been recent developments that have put Hong Kong’s offshore market in the spotlight from time to time, such as its pricing of the yuan quite differently from the onshore market,” said a trader at a European bank in Shanghai.
“In this sense, the NDRC statement is published at a sensitive time and means the government once again wants to emphasize that it has the final say in the value of the yuan.”
To realize the stated goals, the city will expedite infrastructure construction for a cross-border yuan payment and clearing network.
Meanwhile, the South China Morning Post reports that Hong Kong, a city that Shanghai has been slated to eclipse financially since the 90’s, has nothing to worry about:
“The term `yuan trading centre’ easily stokes fears in Hong Kong, but obviously Shanghai will focus on the onshore market while it doesn’t necessarily mean Hong Kong’s importance should be played down,” said Gu Weiyong, chief investment officer at Ucon Investment Management.
“Hong Kong could beat Shanghai in terms of attracting international traders as Hong Kong has free flow of capital, a good legal system as well as many international banks and brokers,” said Joseph Tong Tang, of Sun Hung Kai Financial.
“International investors cannot freely trade in the Shanghai market, while the mainland legal system is different from international practice. It’s more likely that Shanghai will act as an onshore yuan trading centre for mainland firms and Hong Kong will be the offshore trading centre for yuan for international investors.”
So rest easy for the time being, Hong Kong. Shanghai’s yuan-grubbing is still a few years away from coming to fruition. The specter of even more mainlanders arriving from Dongguan and Guangzhou to promenade along your morally depraved streets is probably the more pressing issue for the time being.