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Shanghai needs rule change to be financial hub

(Xinhua)
Updated: 2009-05-15 19:54

SHANGHAI -- Zhou Xiaochuan, governor of the People's Bank of China (PBOC), Friday said China needs to modify market regulations to turn Shanghai into a global financial center.

"(We) should make clear and improve from time to time our rules of the game when developing a global financial center," Zhou told a financial forum in Shanghai.

He said the rules, including the legal system and those on accounting, corporate governance and initial public offering, should be modified for global acceptance.

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China plans to make Shanghai a global financial center by 2020 that matches the country's economic strength and the international status of its currency, the State Council, or Cabinet, said on April 29.

To achieve the goal, the authorities should also improve infrastructure and information environment and modify rules on tax, market access and talent recruitment, Zhou said.

"The ratio could fall following government measures to boost domestic demand, but it will continue to be high globally for a long period of time," he said. "With the huge savings and the government encouragement for overseas investment, we have all the conditions to speed up the development of various investment funds."

He noted that the authorities will encourage the funds to take bigger risks as they are more risk averse compared with their overseas counterparts.

Shanghai can draw experience from Hong Kong and work with the major financial center in Asia to reach its target, Zhou told the second Lujiazui Forum.

The official said Shanghai, like major brands in the country, needs to stick to the principles of globalization in becoming a global financial center.

In 2006, China's voting power in the International Monetary Fund (IMF) was raised to 3.66 percent from about two percent. The United States has  16.77 percent of the voting power, giving it the veto power.

"There should be more clear adjustment in the next round of cash injection into the IMF before 2011," he said.

Many economists believed that China would be the first nation to recover from the global downturn, allowing the fast growing economy to play bigger role in the post-downturn world finance affairs.

Zhou said a bigger voice, however, comes with challenges. He said that there is yet no consensus among experts and officials.

"But one thing, I believe, is clear," he said. "With the development of China's economy and finance, we need an international financial center."

Wu Xiaoqiu, a professor of finance at the Renmin University of China, said in late April that the global financial crisis brought to China more opportunities than risks.

In the post-crisis period, Shanghai would join New York and London to be the world's three major financial centers, Wu said.

Zhou said that to some experts, the international financial centers, like New York and London, could be hard hit in the global financial crisis. But the centers, he added, could be very helpful for economic growth, resources optimization and financial innovation.

"So we should stick to the target," he said.