Shanghai rises on global financial stage

Obvious attraction

One of the obvious attractions of the Chinese market is the rising wealth of private investors, who are looking for a home for their money.

According to Oliver Wyman, a consultancy, the amount of money available to retail investors is expected to grow from $24 trillion in 2018 to $41 trillion in 2023.

Much of this wealth is lying relatively dormant in bank deposits－albeit those that provide a better interest rate than in many Western countries－rather than in investment assets.

Wojcik, also chair of the Global Network on Financial Geography, an interdisciplinary network, said there is a clear role for foreign financial institutions in China. This is because Chinese investors often lack confidence in risking their money, and is made worse by scandals involving fraudulent internet finance companies in recent years, he said.

"The asset management industry is very underdeveloped in China, so foreign firms could play a major part in this sector," he added.

Wojcik believes there is a real opportunity for overseas financial institutions to partner with China's big technology companies to reach hundreds of millions of savers.

"This would help diversify their investments into international portfolios and would also have major implications for asset prices worldwide," he said.

Zhu also believes this is a major opportunity for foreign financial players, but it will not be straightforward.

"Wealth management is one highly promising field and foreign players certainly have some clear advantages. For them to make a significant impact, they have to localize their ways of doing things and bridge Chinese clients with international financial markets," he said.

One area where Shanghai and China's other financial centers could take a lead is fintech, where the country is using its expertise in digital technology and payment systems.

Five of the top 10 fintech financial centers in the world are Chinese, according to the Z/Yen and CDI index.

The Chinese government is also set to trial a digital currency. On Oct 23, the People's Bank of China, the country's central bank, announced a proposed new banking law that would recognize the yuan in both physical and digital form.

Wardle, at Z/Yen, said this can only strengthen the fintech base of China's financial centers.