Shanghai to be world’s largest financial centre

Shanghai is on track to becoming the world’s largest financial centre within the next decade. And it’s all down to China continuing to open up its capital markets and expand its investor base, reports KPMG.

In absolute size, China’s equity markets have now grown to a significant level, up from US$400bn in 2005 to US$4trn in 2010. This growth has been fuelled by over 500 initial public offerings, including the listings of China’s largest banks, which means Shanghai now has some of the world’s largest companies represented on its bourse.

In a joint report by KPMG, FTSE Group and Dagong Global Credit Rating, the importance of the internationalisation of the RMB is highlighted and progressive steps towards the launch of the International Board on the Shanghai stock exchange. The new board aims to enable foreign organisations to access the Chinese markets allowing domestic investors direct access to foreign listed companies for investment purposes.

Simon Gleave, KPMG China’s regional head of financial services, said,  “Although China’s corporate sector remains highly dependent on bank financing, there is growing interest in corporate bonds. We will, therefore, see greater interest in bond and equity financing as the market matures. We expect this growth to continue, particularly if there is further tightening of the bank and regulatory environment. Meanwhile, the internationalisation of the RMB will also help to support China’s ambitions to transform Shanghai into an international financial centre. In order to achieve these goals, we may need to see full capital account convertibility, and opening of RMB-denominated A-Shares to foreign investors.”