Shanghai snatched the opportunity in 1992 to develop its financial industry.

The industry was always two to three years ahead of that in other parts of the Chinese mainland and is closing the gap with other centres, according to the economists.

"Shanghai has long established itself as the financial centre of the Chinese mainland," said Yang Jianwen, director of the Department of Economic Research at the Shanghai Academy of Social Sciences.

Experts believe that becoming an international centre is the goal.

"However, this breakthrough is not to be made overnight," Yang said. "It will take 10 to 13 years."

Coverage rate

The economic power of Shanghai should be further developed to back up its status as a financial centre.

The experience of other centres, such as New York or the Hong Kong Special Administrative Region, showed that to become an international financial centre the city's total gross domestic product (GDP) value has to cover 10 to 15 per cent of the country's total, Yang said.

However, by the end of 2000, the GDP of Shanghai only covered 5 per cent of the country's total.

"The coverage rate of Shanghai is projected to reach 10 per cent in 10 years," said Yang.

The prediction is based on the condition that the annual GDP growth rate of Shanghai is always 3 per cent higher than the average of the country, he said.

Sources from the Shanghai Statistics Bureau showed that the city achieved 10.2 per cent GDP growth in the January-June period of 2001, about 3 per cent higher than the country's 7.9 per cent, according to Yang.

Policy support

The city's development needs the support of the central government, according to participating economists.

"In this sense, I believe Shanghai will have a competitive relationship with Beijing," said Xiang Pinggui, a certified financial analyst.

"With the headquarters of most Chinese banks not based in Shanghai, it needs more effort to be developed into an international financial centre."

Under the condition that the management headquarters of most Chinese banks will still be located in Beijing for an indefinite period, economists at the conference suggested that the settlement centres of those banks be moved to Shanghai.

The yuan convertibility issue - interest rates are controlled by the central bank and the settlement centres of both securities trading and banking businesses are not based in Shanghai - will hinder the city from establishing itself as a financial centre.

According to a speech by Liu Tinghuan, the vice-governor of the central bank, the People's Bank of China (PBOC), China is to quicken reform of interest rates.

The marketization of the renminbi deposit interest rate is not expected for 10 years, officials from PBOC said.

Yang's team is working on a report to the municipal government.

Cargo flow

Financial centres feature a high rate of capital mobility and "high capital flow is achieved only when there is large amount of cargo flow," Yang said.

Shanghai is striving to become an international economic, trade and transportation centre within five years.

Transportation by the Yangtze and Huangpu rivers in Shanghai is declining. Therefore, the city is focusing on developing deep-water ports so as to increase the cargo flow.

The Dayangshan and Xiaoyangshan Deep-Water Port projects have received approval from the central government and are expected to start this year.

After these deep-water ports are completed and freer port management mechanisms established, cargo transported through Shanghai (with Shanghai not the destination) are expected to increase from the current coverage rate of 50 per cent to 70 per cent of the total cargo amount.

"In this way, the capital will increasingly move from Shanghai to outside and vice versa, stimulating financial services here," Yang said.

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