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Business Focus Cover Story Planning a Grand Future Standing at the corner of West Beijing’s Financial Street, you might think you were standing on Wall Street in New York City. Glistening skyscrapers soar above Beijing’s West Second Ring Road and beyond. Stylish hotels and boutiques pack modern buildings. Demand for new office space outruns the pace of construction. Financial Street, the name of Beijing’s bustling new showpiece, used to be a place of old alleys and courtyards. Today, it is home to China’s top financial regulators, the headquarters of domestic financial institutions, and of more than 500 global financial institutions. Earlier this year Beijing’s Municipal Government announced its ambition to become not only a financial hub in Beijing, but also a domestic and possibly global financial center. As a result the city will put forth vigorous efforts to become a financial management, information, and service base. A Quiet Advance For a long time, Beijing had defined its role as a political and cultural locus serving the country. As Shanghai and Shenzhen grew assertive in their financial goals, Beijing cautiously avoided any “financial center” designation as such, to avoid criticism of allegedly redundant construction. The city stayed tight-lipped: “Although Beijing never made its ambitions known, it has actually risen to become China’s financial center, and is on solid ground in its drive toward internationalization,” Li Yang, Director with the Institute of Finance and Banking under the Chinese Academy of Social Sciences (CASS) told the Beijing Youth Daily. Zhou Chunsheng, a professor at Cheung Kong Graduate School of Business, also remarked to the same publication: “As a financial base, Beijing is unparalleled in access to information and pools of professionals, and is knocking on the door to be let in by the world’s financial players.” The financial sector has been significant in Beijing’s economy. It contributed 12.5% to the city’s total GDP in 2007 - the highest proportion among Chinese cities. In the first quarter of 2008, the percentage of Beijing’s tax revenues from the financial sector ballooned to a dizzying 88.7% over the previous year, surpassing all other industries. Currently, over 80% of China’s capital goes through Beijing for processing. Over 80% of China’s banks, insurance companies, and securities firms are headquartered in Beijing, which boasts the regional branch offices and research organizations of 293 Fortune 500 enterprises. Fig. 1 | Beijing vs. Shanghai in 2007 Beijing Shanghai Financial sector worth RMB 112.63bn Financial sector worth RMB 119.57bn (USD16.1bn) (USD 17.1bn) 12.5% of GDP 10% of GDP Home to 677 financial institutions: Home to 604 financial institutions: 234 banks 109 banks 59 securities firms 94 securities firms 117 insurance companies 261 insurance companies October - November 2008 | 10 The German Chamber of Commerce in China Beijing – Knocking on the Door of Global Finance From left to right, Mr. Werner Lauk, at that time German Deputy Chief of mission to China, Mr. Wu Jian, President of Hua Xia Bank, Dr. Hugo Bänziger, Chief Risk Officer, Member of the Management Board and the Group Executive Committee at Deutsche Bank, and Mr. Xie Chaobin, Deputy Governor of Chaoyang District Government with traditional lions at the opening of Deutsche Bank Tower in Beijing Even more importantly: Beijing is the birthplace of China’s financial policies, where the Central Bank (People’s Bank of China), China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission make their decisions. “With strained land resources and environmental protection pressures, Beijing is not ideal for labor-intensive manufacturing, but is perfect for the high-end service industry. Finance is bound to be a future pillar of its economy,” added Zhou. Beijing or Shanghai? Beijing’s financial commitment has made some other Chinese cities nervous, especially Shanghai, which has long sought to become an international financial center. Some feel Beijing’s rise might blunt the prospects for Shanghai and dilute China’s competence as a whole. Others argue that Shanghai will pursue its own dream on the back of a buoyant financial market. However, neither of the two cities seems capable of overshadowing the other. (Fig. 1) Undeniably, the Shanghai Stock Exchange is the beating heart of Chinese finance, much like the New York Stock Exchange is for the USA. The Shanghai Gold Exchange and Futures Exchange also add importance. “In contrast, Beijing is handicapped by lack of an influential financial platform despite numerous financial institutions,” Qi Bin, Director of the Research Center under the China Securities Regulatory Commission said to the 21 st Century Business Herald. However, Shanghai’s development does not come at Beijing’s expense. “Shanghai’s development can breathe life into finance in the whole country, as it will deliver better financial services to institutions in other locations,” Tu Guangshao, Vice Mayor of Shanghai said at the Shanghai Lujiazui Forum. Vice Premier Wang Qishan stated he believed that Shanghai’s financial blueprint would eventually come true as China’s financial reforms continue. A Win-Win Game Many argue that China might need more than one financial center to drive its domestic economy. “Shenzhen and Hong Kong will become the financial powerhouses for South China, and Shanghai drives the development of East China. As China’s financial control center, Beijing will extend financial support to northern areas as well,” Niu Fengrui, a
The German Chamber of Commerce in China researcher with the CASS, told the 21 st Century Business Herald. “Each financial center has different positioning, leaving the opportunity for cooperation. Given implementation of a full-fledged market economy, competition can optimize the efficiency of resource allocation,” added Niu. The USA also has multiple financial centers: New York leads the world in stock and energy futures, while Chicago is recognized as the global financial derivatives trading center. The Road Ahead Beijing has obviously sensed its opportunity. Working closely with Tianjin, which aims to set up China’s first over-the-counter stock exchange, it is pursuing pilot funding programs to help small and medium-sized enterprise startups. A private equity fund council will also be created. Meanwhile, Beijing’s three economic pillars - Financial Street, the Central Business District, where Beijing’s 2 nd financial district is now growing promoted by the Chaoyang District Government, and the Zhongguancun Science Park - will continue to expand, adding to Beijing’s financial strength. Beijing is increasingly unleashing its financial potential by stepping up favorable policies. CITIC Securities told the 21 st Century Business Herald it has decided to relocate its headquarters from Shenzhen back to Beijing. Additional fund management companies are also reportedly considering the move. Nevertheless, markets should not be underestimated in creating a financial center. Philadelphia was originally the financial center of the USA, Cover Story but was gradually replaced by New York. “It’s the markets that call the shots on where the financial center will be, not the government,” Zhou Ziheng, a researcher with the CASS told Beijing Youth Daily. Zhou also pointed out that China should not rush to create a financial center based on immature markets and cautioned that China’s financial security could easily become vulnerable to foreign speculators. Finance Experts on Banking in Beijing Mr. Lee Zhang, Chairman of Deutsche Bank China: “The opening of Deutsche Bank Tower in Beijing is a result of concerted support from the regulators in China, the municipal government of Beijing, and the Chaoyang District Government, who have provided excellent infrastructure and a favorable business environment for Deutsche Bank China to thrive.” Mr. Michael M. Reichel, General Manager, Commerzbank Shanghai Branch: “After opening a branch in Hong Kong (1979) and in Shanghai (1994) as well as being the first German bank with a representative office in Beijing (1981), we are currently preparing to open a further branch in Tianjin. Commerzbank China offers SMEs as well as multinationals commercial banking products and solutions that meet their needs. We are their creative “relationship bank.” Chris Devonshire-Ellis | Senior Partner - Dezan Shira & Associates Email: info@dezshira.com | Web: www.dezshira.com www.china.ahk.de 11 | October - November 2008 Business Focus
Page 1: Beijing • Guangzhou • Shanghai
Page 4 and 5: GCC Board Beijing * All-China Board
Page 6: Preface The GC Ticker is the intern
Page 9 and 10: The German Chamber of Commerce in C
Page 14 and 15: Business Focus Sino - German Busine
Page 16 and 17: Business Focus Yingkou - North Chin
Page 18 and 19: Business Focus Kunming - South Chin
Page 20: Business Focus Yangtze River - East

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