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Transcript of Shanghai 2020
as a Major Financial Center (ver 2.0)
Richard Turrin Hult Interational Business School, 24 July 2013
So what is a Global Finance Center
Shanghai and Finance
Who are the Participants?
New York and London
What do you need to be one?
Frankfurt and Paris
On the Positive Side
Where is Shanghai today?
Bonds you can't buy, and if you're a
banker can't issue.
But with Electronic Trading I can be
Benefits to being where
the money is
Hong Kong vs. Shanghai
Why Not Tokyo and Singapore?
You can't buy them and would you want to?
A very short chapter.
If primary markets are unstable, how can derivative markets work?
Based on the American Chamber of Commerce publication "Achieving 2020"
Self contained marketplace where transactions can get done without leaving the market
Sufficiently large so that both risk buyers and sellers are attracted
International attraction of capital
Monied counterpaties willing to bet not only on the viability of the investment but on the long-term viability of the venue where the trading takes place.
Yes if you are a Hedge Fund, but you still need a Prime Broker to staff your back office
Still a people business
Sales require a personal touch
For every trader there are 5-7 support staff
Skilled people are hard to find so society concentrates them to maximize their value
Where are your skills worth the most?
Do you see why the UK was not willing to accept a universal financial transaction tax proposed by the EC?
Availability of Staff
Quality of Life
Rule of Law
Proximity to Customers
Ease of foreign entry
Time zone near customers
Frankfurt was once a contender to challenge London
Lost due to language barrier and taxes
Still a major banking center due to the size of the German Banks
Paris.....even the French set up in London due to taxes
Tokyo has horrific local laws
Innovation is stifled, legal system not ready for international business
Singapore has everything going for it and is a competitor to Hong Kong
Sing. is successfully taking HK's asset managers
Lacks transaction volume
Hong Kong follows British Law and is the ultimate business environment
Continues to profit from China outflow business
Most China focused iBanks are in Hong Kong
PRC policy is to support Hong Kong via non-interference
Long term preference for bringing business to Shanghai
When will Shanghai be ready, if ever
Access to China Market
Backing of Gov't
Markets exist though not robust
City is "world class"
Infrastructure is developing
On the Negative Side
Difficult for foreigners
No tradeable currency
Legal Structure doesn't transport
No separation of Gov't and business
Poor services, legal, accounting etc
English skills poor
So when can foreign firms join in?
Dim Sum Bonds: What you need to know
You can buy Chinese stocks in the US and Europe through"reverse mergers" Really?
Difficult Markets to Trade
Impossible to know true market value
Legal system is major obstacle
Not realistic to think that you can recreate 150 years of market experience in 8, even in China
Difficult to understand division between Beijing and Shanghai
Hong Kong should remain guardedly optimistic, short term. Longer term?
Shanghai may be like Frankfurt to Hong Kong's London
FT July 5 2013
Will you buy into this
Can you start a broker account in downtown Shanghai and buy securities here?
How do you buy Chinese equities in China?
How do you buy Chinese equities elsewhere?
Can your company buy securities here?
What role does accounting play in capital markets and why is this a problem?
What is one way to get exposure to RMB without transferring cash to China and converting it?
Can I freely convert RMB to Euro or US Dollars?
What technique has been used to bring Chinese firms to US and European equity markets?
What is the difference between Private Equity and a Bank?
What does A-shares mean?
What is a QFII, what is the new gov't policy directed toward them? What is this policy's goal?
Would you buy in this market?