Coming up: Shenzhen’s new fintech trick

Yesterday the Shenzhen Evening News had a long article extolling the virtues of the Futian district as the city’s financial heart. The main thrust of the piece is preceded by accounts of what the political leadership has been up to recently, including that Party Secretary Wang Weizhong met on August 29 with Yi Gang, head of the central bank, in Shenzhen. They discussed what any two cadres with their fingers on the pulse of international finance would: Internationalization of the renminbi, digital currency research, green finance, etc. They decided to, first and foremost, continue to deepen financial reform and opening up, realize the high-quality development of Shenzhen’s financial industry, and fully promote the implementation of the major decision-making arrangements of the Party Central Committee.

Nothing new there. But then the reporter reminded readers of some of the fine print of the Central Committee’s decision to make Shenzhen a “Pioneering Zone for Socialism with Chinese Characteristics”, or PZSCC.  These included: Researching and improving the GEM board; restructuring the city’s regulatory system related to mergers and acquisitions; supporting “innovative applications” such as digital currencies and mobile payments; promote “interoperability” with Hong Kong and Macau financial markets and mutual recognition of financial (fund) products. 

A final point stands out: In the promotion of the internationalization of the renminbi, Shenzhen will explore “innovative cross-border financial supervision”.

Stay with us, dear readers, it gets better. Barely a week after that meeting, the head of the Finance Bureau for the Futian district, Zhu Jiang, disclosed that a meeting was held on Thursday last week that outlined a new plan for his district’s role in the PZSCC. He said Futian, home to Ping An Insurance and China Merchants Bank, among many other Chinese financial heavyweights, had been chosen at the start of the year for the headquarters of a new taskforce set up by the provincial government. The Financial Work Bureau would be researching global trends in finance and technology and play a key role in Shenzhen’s mission to become a … wait for it … “new kind of international finance center”.

This new IFC has a new kind of name, too: The “International Financial Technology Gathering Demonstration Area”.

According to SZ Evening News, as Zhu succinctly puts it (our translation): “Global financial growth in the next decade will be in fintech, and the focus of competition among international financial centers will also be in fintech. Shenzhen, therefore, should make full use of its advantages in technology and innovation, seize the historical opportunity of the integration of finance and technology, drive the transformation and upgrading of the traditional financial industry, and win a place in the competition among international financial centers such as New York, London and Hong Kong.”

In plain English: We plan to be up there with the Big Three, and we can do it because of fintech. Leaders of global finance, we are coming to disrupt you.

How long? There is only a mention that Zhu’s bureau is working on research that will go into the 14th Five-Year Plan. Not immediately, in other words. 

It won’t likely happen quickly enough to contradict sources quoted by the SCMP today in  one of those big-picture articles they have been running recently, titled, “Can Hong Kong resist China’s push to turn Shenzhen into financial hub.”

The respondents were correct to point out that Shenzhen doesn’t have a legal system like Hong Kong’s, and it doesn’t have a freely convertible currency. 

Yet what they failed to point out is that Shenzhen is working hard on legal reforms, setting up special courts and arbitration centers in Qianhai aimed at attracting global business. Their model is clearly Singapore, rather than Hong Kong. Judging from the amount of business Singapore does as an international finance center, one would have to assume that would be just fine for global business leaders.

Moreover, Shenzhen is home to Ping An, which runs the QEX, whose forex quotas could easily be widened to take more HKD-RMB business. Ping An is the world’s seventh most-profitable company and one of the clear leaders of the fintech industry.

Indeed, Futian has a fairly well-developed financial infrastructure already. As per the SZ Evening News article, the district has: 

  • 247 licensed financial institutions;
  • 51 of these were set up in the past two years;
  • 13 of which were set up in the past six months;
  • two of which are Ping’an Bank Auto Financial Center, the first nationally licensed auto financial company, and CCB Wealth Management, the first such subsidiary of a national bank.
  • In the first half of the year, the district’s financial services industry generated RMB 67.581 billion in output, accounting for one third of its GDP.

Would five years from now be too soon to expect Shenzhen’s Futian district to be a fully fledged International Financial Technology Gathering Demonstration Area?

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