Shanghai's capital factor market continues to see explosive new products, with three key words highlighting the market | factors | Shanghai
Since the beginning of this year, the direct participants in the RMB cross-border payment system have been growing rapidly, with 12 direct participants joining, bringing the total to 91. This number exceeds the increase in the number of direct participants throughout last year, with 1365 indirect participants.
This network, spread from Shanghai, has covered 182 countries and regions worldwide, and countless capital factors come and go through this network. This important infrastructure of Shanghai's capital factor market has become a vivid portrayal of Shanghai's allocation of global resources. Not only infrastructure, but also in this gathering place of capital elements, the market, institutions, and products are constantly improving their capabilities, and the three key words are gradually becoming prominent.
Keyword 1: Convenience
The convenience of entering, investing, and trading in an active capital factor market is a necessary foundation.
The task of infrastructure is to pave the way and build bridges. Like CIPS, Shanghai Clearing House has made frequent efforts this year and successfully launched innovative products such as "Swap Connect" and "Yulan Bond". The relevant person in charge of the Shanghai Clearing House introduced that the "Yulan Bond" domestic issuer overseas bond issuance channel jointly launched by the Shanghai Clearing House and the European Clearing Bank has received very good feedback in the international market. Currently, hundreds of international investors have personally experienced it, including overseas sovereign institutions with higher requirements. Relying on the custody network of the European Clearing Bank, the business can cover more than 50 markets around the world. International investors have another convenient and efficient new option to allocate Chinese bond assets.
It is worth mentioning that this product has also realized the export of innovation experience of China's bond market for the first time. Drawing on the successful experience of "Yulan Bond", the European Clearing Bank has successively collaborated with institutions in Japan and Singapore to successfully launch bond issuance models such as "origami bonds" and "orchid bonds".
The pilot program for qualified overseas limited partners, which was first launched in Shanghai more than ten years ago, has also ushered in new optimizations. In February this year, the QFLP foreign exchange policy in the Lingang New Area expanded to cover the entire city of Shanghai, and a series of convenient measures benefited more foreign enterprises. If the pilot scale is awarded to the management enterprise, the pilot scale can be flexibly adjusted and used between different funds responsible for the same management enterprise; The pilot scale implements balance management, and foreign investors can freely remit and remit principal within the registered limit, participate in the subscription and redemption of pilot funds; Qualified foreign exchange funds can be directly settled after entering the country
At present, three foreign-funded enterprises, Bofeng Investment, Oasis Investment, and Kaitai Vision, have passed the QFLP pilot joint meeting evaluation and become the first batch of pioneers since the implementation of the new foreign exchange policy expansion.
The experimental field of China's capital market, the Science and Technology Innovation Board, has also opened its doors to investors around the world. They can fully participate in the primary and secondary markets of the Science and Technology Innovation Board through the QFII/RQFII mechanism, including the issuance of new shares, additional stock issuances, and subscription of rights issues, trading of individual stocks and funds on the Science and Technology Innovation Board, margin trading, securities lending, and securities lending transactions. Foreign investment can also trade eligible stocks on the Science and Technology Innovation Board through the Shanghai Hong Kong Stock Connect. Currently, 253 stocks on the Science and Technology Innovation Board have been included in the Shanghai Hong Kong Stock Connect. With the release of the Science and Technology Innovation 50 Index products in overseas markets, the channels for foreign investment in the Science and Technology Innovation Board are further expanding. As of the end of May, 12 Sci Tech Innovation 50 Index products have been listed in multiple overseas markets such as the United States, Japan, and the United Kingdom, with a total scale of approximately 2.184 billion yuan.
Under multiple measures, as of the end of June 2023, the proportion of foreign investors holding the circulating market value of stocks on the Science and Technology Innovation Board has increased from 0.56% at the end of 2019 to the current 3.6%.
Keyword 2: Attraction
The key to whether a market can grow and strengthen is not only convenience, but also the ability to develop attractive assets and products.
Recently, shipping companies, shippers, freight forwarders and other enterprises have been eagerly anticipating the launch of a financial derivative - Shanghai Export Container Settlement Freight Index Futures.
The Shanghai Export Container Settlement Freight Index is an index based on the prices of international container European transportation services. Developing futures based on this price index can help the industry avoid the risk of freight fluctuations and better control logistics costs. Simply put, if a company wants to transport goods from Shanghai to Europe using containers, they can first buy index futures in the futures market. If the freight charges increase in the future, the money earned by the futures market can subsidize the freight charges.
Importantly, this futures product adopts the design concept of "service-oriented index, international platform, RMB pricing, and cash delivery" from the beginning, attracting international enterprises to participate in the market together.
The international board of reinsurance is also eagerly anticipated by the market. At the Lujiazui Forum in June this year, the former Shanghai Banking and Insurance Regulatory Bureau and the Shanghai Local Financial Supervision Bureau jointly released the Implementation Rules on Accelerating the Construction of Shanghai International Reinsurance Center, opening a reinsurance trading market for the world in Shanghai.
At present, this market is under hot construction. In terms of hardware, Shanghai has selected an office location for the International Reinsurance Trading Market in the Financial Bay Park of the Lingang New Area, and has arranged for a nearby building to be available for backup at any time based on the expected number of institutions to settle in. In terms of software, the construction of the first phase of the international reinsurance business platform has been completed, which can achieve necessary transaction management functions such as standardized real-time interaction of reinsurance transaction information, transaction confirmation, contract certification, bill signing, and centralized management of electronic transaction records.
According to the Shanghai Regulatory Bureau of the State Administration for Financial Regulation, nearly a hundred domestic and foreign insurance, reinsurance, and brokerage institutions have come to inquire about their participation channels.
Science and technology innovation finance, green finance, offshore finance... The attractiveness of Shanghai's capital factor market to the world still has too much room for development. The popular products that the market eagerly anticipates will continue to be updated in the future.
Keyword three: Agglomeration
With convenience and attractiveness, a market will inevitably gather more and more institutions, and this agglomeration will naturally feed back the market itself.
In June of this year, when Schroder Fund Management Co., Ltd. was unveiled in Shanghai, the CEO of Schroder Investment Group, Hao Ruicheng, said, "Shanghai's pro business environment, coupled with excellent financial infrastructure and vibrant vitality, continues to play an important role in China's financial opening up and Shanghai's growth into a major global financial center."
This is also why Schroder and a group of foreign giants chose Shanghai. Since the lifting of the foreign equity ratio limit for public fund management companies, all four newly established foreign-owned public fund management companies in China have settled in Shanghai. The five joint venture wealth management companies that have been approved for operation have also settled in Shanghai. These companies have launched and are brewing financial products, which have greatly increased the richness of the market.
As an international financial center, Shanghai is also building a global asset management center, financial technology center, and green finance hub. Gathering more excellent financial institutions is an inevitable choice and a long-term process.
With more and more visitors from all over the country, there is a voice that believes that there are already many financial institutions in Shanghai. Do we still need to make great efforts to introduce them?
"In fact, Shanghai still has a lot of room for improvement in terms of agglomeration." Industry insiders pointed out that in terms of proportion, foreign financial institutions in Shanghai account for about 30%, which is still far from the proportion of about 70% in international financial centers such as New York. From a functional perspective, the level of existing financial institutions in Shanghai is not high enough, and there are not enough super large, heavyweight, and headquarters level financial institutions settling in Shanghai.
The above individuals suggest that in the future, Shanghai should focus on attracting some super large and functional financial institutions, and establish a group of key and basic financial entities to fill the gaps and improve its level, helping Shanghai's capital factor market truly grow and strengthen.
