RMB accounts for more than 50% of my country’s cross-border transactions. The more open we are, the more we must pay attention to security.

In the process of RMB internationalization, there were two important events last year: in March, the RMB's share in my country's cross-border transactions rose to 48.4%, surpassing the U.S. dollar; in July, the share exceeded 50% for the first time. A signed article recently published by the "Financial Times" commented: "The RMB has achieved impressive achievements in 2023: the scale of cross-border use has rapidly expanded."

In the cross-border use of RMB, the hub is undoubtedly Shanghai. Data from the Shanghai headquarters of the People's Bank of China shows that last year, Shanghai accounted for 43.5% of the country's total cross-border RMB settlement volume, continuing to maintain its first place.

From the cross-border use of RMB, we can get a glimpse of the development of Shanghai’s international financial center in recent years. According to the latest Global Financial Center Index (GFCI) released by the British think tank Z/Yen in September last year, Shanghai ranked seventh in the world. Since Shanghai first proposed the idea of building an international financial center in the early 1990s, after about 30 years of development, by 2020, this idea has been basically realized.

However, compared with the international first-class, Shanghai International Financial Center still has many shortcomings to make up for. One of the prominent ones is that the level of internationalization is still low. Let’s take the internationalization of the RMB as an example. Although the RMB accounts for more than 50% of my country’s cross-border transactions, its share in global payments is only about 4%.

At the Fourth Plenary Session of the 12th Municipal Party Committee held on December 18 last year, regarding the construction of the "Five Centers", it was emphasized that it should "serve the national strategic needs and accelerate the improvement of internationalization levels." One of the important functions of an international financial center is to allocate global resources. Improving the level of internationalization is an unavoidable proposition in Shanghai's future development.

“The international status of finance depends first on Shanghai”

Finance is the blood of the national economy and an important part of the country's core competitiveness. Judging from historical experience, the rise of a great power cannot be separated from the support of a strong financial system. Shanghai is a crucial link in this system. In 1991, when Comrade Deng Xiaoping inspected Shanghai, he pointed out: "China must first rely on Shanghai to achieve international status in finance."

As of April 2023, Shanghai has 1,736 licensed financial institutions of various types, of which foreign financial institutions account for about 1/3; the first batch of foreign-controlled securities firms, the first wholly foreign-owned insurance holding company, and the first wholly foreign-owned life insurance company Insurance companies and the first foreign legal person reinsurance company have successively launched in Shanghai; "Shanghai-Hong Kong Stock Connect", "Bond Connect", "Shanghai-London Stock Connect", etc. have been launched...

Looking back at the 1980s, when New China's first stock "Feile Audio" was issued in Shanghai, the designer had no idea about the popular styles of overseas stocks, so he had to go through all kinds of troubles to find Shanghai Nanyang Cigarettes before the founding of New China. The factory's stock sample sheet was copied almost unchanged. More than 30 years later, if we look at the internationalization of Shanghai's financial center today, it can be said that it is completely different from what it was back then.

But comparison with the past is not enough. After Shanghai is basically built into an international financial center in 2020, domestic and foreign countries have more expectations for the city's financial internationalization level.

There is still a lot of room for internationalization

"We are developing business based in Shanghai, and one of the pain points is cross-border data flow." In September 2023, at the Bund Financial Summit, Wang Yunfeng, President of HSBC Bank (China) Co., Ltd., stated a common demand of foreign financial institutions.

The connection with the world is still not strong enough. This is a pain point for enterprises and also a pain point for Shanghai as an international financial center. Over the past 30 years, although the city's internationalization has continued to increase, there is still a clear gap between it and the world's first-class financial centers such as New York, London, and Singapore. Some research institutions arranged the global financial centers as scattered points on a plane and connected the relevant ones with lines. They found that New York, London, and Singapore were like several radiation sources, connecting other nodes with dense lines. In contrast, the "light" around Shanghai is much dimmer.

Some comparative data can easily confirm this: the number of multinational financial corporate headquarters in Shanghai is less than 1/3 that of London and 1/2 that of Hong Kong, the number of overseas listed companies on the Shanghai Stock Exchange is still zero, and the average daily foreign exchange trading volume is only 3.8% of London’s. ...The internationalization level of Shanghai International Financial Center has reached a moment when it urgently needs to break through the bottleneck.

On November 12, 2020, General Secretary Xi Jinping clearly stated requirements such as “building an international financial assets trading platform” in his important speech at the celebration conference for the 30th anniversary of Pudong development and opening up. Earlier last year, the meeting of the Shanghai Leading Group for Promoting the Construction of Shanghai as an International Financial Center made it clear that the top priority this year is to prepare a high-standard international financial asset trading platform and strive to create a strategic pivot for two-way flow and in-depth integration of global assets. Continued from version 6 (continued from version 1)

Tu Guangshao, executive director of the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, believes that international financial asset trading platforms can be supported by various existing financial markets to attract overseas financial assets to trade, such as in the stock market, through the establishment of the Shanghai Stock Exchange International Board. , serving the needs of overseas companies listing in China.

In addition to building an international financial assets platform, there is still a lot of room for the Shanghai International Financial Center to improve its internationalization level, including reinsurance international board, RMB internationalization, and cross-border flow of financial data.

The more open we are, the more we must pay attention to safety.

Financial security is an important part of national security. The more open we are, the more we must pay attention to security. At present, our country is at a critical stage of moving from a middle-to-high-income country to a high-income country. Implementing a financial security strategy is the key to ensuring high-quality economic development.

However, the development experience of many countries shows that it is not easy to stably enter the threshold of high-income countries, and many countries have experienced economic fluctuations in the process. Financial sanctions and long-arm jurisdiction are one of the important reasons for such fluctuations. Huang Weiting, deputy director of the Xi Jinping Research Center for Economic Thought, issued an article last year saying that as the game between great powers intensifies, the risk of some countries using monetary hegemony to suppress and contain my country is also increasing, such as restricting my country's use of international financial infrastructure and services.

Focusing on national financial security, Shanghai will strengthen the development of core technologies of financial infrastructure, the guidance of major rules and cross-border interconnection, and expand the global coverage of the RMB Cross-border Payment System (CIPS). Among them, CIPS is one of the financial infrastructures that has attracted much attention at home and abroad. It is operated by Cross-border Interbank Payment and Clearing (Shanghai) Co., Ltd., headquartered in Shanghai, and mainly provides RMB cross-border clearing services. It is reported that in the next step, CIPS will gradually increase the information message function and improve the independence, integrity and security of the message transmission chain to further increase its international usage ratio.

In 2023, the world's major financial media have noticed a fact: the RMB's rising status in international transactions. "This could have profound consequences for Asia and beyond in the coming years," the Wall Street Journal said in an article.