A comparative study of financial centres of Hong Kong, Beijing, Shanghai and Shenzhen

Abstract

The rise of Chinese economy has favoured the growth of several financial centres in China. This phenomenon has drawn much attention to several scholars who focus on the relationship between Hong Kong and Shanghai. With a few exceptions, the relationship among Beijing, Hong Kong, Shanghai and Shenzhen have not been satisfactorily revealed, while financial competition and cooperation among them are also far from clear.

This thesis examines the financial systems of Hong Kong, Beijing, Shanghai and Shenzhen to show their strengths and weaknesses. Financial markets, such as the stock market, bond market, funds market, insurance market, futures and derivatives market as well as the foreign exchange market are all included in this study. In addition, other important players (banking industry and multinational corporations) in the financial system are covered. This study shows that Hong Kong’s strengths lie in its stock, fund, insurance, financial futures and options, foreign exchange and its related derivatives markets, banking industry as well as the attractions of multinational corporations; whereas it is weak in parts of the stock market, the GEM, bond, PE/VC funds and commodity futures markets. Beijing is an important player in the banking industry, stock, bond, private equity fund, VC fund and insurance markets. However, it is not so developed in regard to foreign currency bond, fund (excluding PE and VC funds), financial futures and options, foreign exchange and related derivatives markets, foreign banking and the attractions of multinational corporations. Shanghai is considered to be at a similar level of ranking as Beijing. It is the capital centre of China and has the no.1 fund market in the Mainland although weaker than that of Hong Kong. Shanghai is also strong in foreign banking industry and the attraction of multinational corporations. Whereas Shanghai is weak in its banking industry (excluding foreign banking), bond market, PE/VC funds, financial futures and options as well as foreign exchange markets. Shenzhen is the weakest financial centre, with its advantages in the SME board, ChiNext and VC funds. Another finding of this study reveals that, except for the previous studies on financial centre competition and cooperation in China, there are still some potential areas such as the financial cooperation between the HKEx and SSE, the GEM and ChiNext as well as the financial competition of the private equity fund industry between Hong Kong and Beijing for the financial competition and cooperation of Beijing, Shanghai, Shenzhen and Hong Kong.

The research findings of this thesis have both theoretical and political implications. Theoretically, the study reflects the significance of an information hinterland as well as law and finance theory in the Chinese financial market and also proves the importance of Beijing as a financial centre in China. Empirically, this thesis offers some implications for policy marking to enhance the better development of these financial centres. Specifically, Mainland China should further promote its regulatory and legal quality in order to provide better regulation and supervision on the financial system. In addition, it should put more effort to promote the development of industries that perform well in Hong Kong, Beijing, Shanghai and Shenzhen.