As China highlights coordinated regional development as a key driver
of the nation's economic growth in the 14th Five-Year Plan period
(2021-25), how the Yangtze River Delta region should contribute to this
pursuit has figured in heated discussions among economists and
The Fifth Plenary Session of the 19th Central Committee of the Communist
Party of China has underscored several policy priorities for the
five-year plan period, including deepening major regional development
strategies and promoting coordinated development among different
The Yangtze River Delta, the cluster contributing a quarter of the
country's GDP and covering Shanghai as well as Jiangsu, Zhejiang and
Anhui provinces, is expected to deepen integration and back the nation's
coordinated regional development, although a specific road map has not
We would argue that the financial services industry should lead the way
to integrated development of the region, with Shanghai playing a more
important role in driving related progress.
Finance is seen playing a pivotal role in social and economic
development. For the integration of the Yangtze River Delta, it can
serve as a key push in at least three aspects: promoting infrastructure
connections; empowering innovative industries; and supporting growth of
wealth and consumption upgrade.
The foundation of Yangtze River Delta integration is the linking of
public services and infrastructure such as railways and highways, a
process that entails a large amount of investment.
Financial institutions should step up innovation and improve financing
services for infrastructure projects like those under the
PPP(public-private partnership) framework.
Also, the establishment of a system of innovative industries lies at the
core of enhancing the competitiveness of the Yangtze River Delta. The
financial services industry can extend its role of helping market
players in the region to sharpen their development capability, providing
better financial services to both large corporations and the smaller
ones with development potential.
Moreover, boosting people's wealth and consumption is key to tapping
into the potential of domestic demand during the 14th Five-Year Plan
period, while per capita wealth and consumption in the Yangtze River
Delta have long been in the forefront of the country.
To promote the accumulation of household wealth and consumption upgrade,
the development of asset management and consumer finance services must
Shanghai, as a rising financial hub with a conpration of financial
institutions, corporate headquarters and talent, should make more
efforts to maximize the role of finance in pushing ahead integrated
development of the region.
First of all, the city should further lift its heft as an onshore
financial services per and step up to build itself into an offshore
financial hub as well, which will facilitate investment and trade within
the region and help it to attract more investments both from home and
By far, the city has become an onshore international financial services
per with the Lujiazui area at the core, while it should further
extend its functions in the pricing of onshore renminbi, settlement,
securities financing, commodity pricing, and asset management.
Meanwhile, given that reform and opening-up policies have made
breakthroughs in the China (Shanghai) Pilot Free Trade Zone, it is
feasible to build an offshore financial per with the Lin-gang Special
Area, a new p of the free trade zone, at the heart.
The per should fulfill the roles such as overseas investment, the
pricing of offshore renminbi, and cross-border trade financing.
Second, stakeholders can work together to maximize the role of
Shanghai's STAR Market in spurring innovation within the region,
especially when it comes to facilitating the growth of tech startups yet
to float their shares.
The STAR Market on the Shanghai Stock Exchange, the pioneer of the
country's market-oriented reform of the initial public offering system
and designed to become the cradle of China's technology leaders, has
seen more than 180 firms raise money from IPOs since it debuted in July
Governmental platforms could deepen cooperation with private equity
funds of funds that invest in tech firms, especially those having the
potential of going public on the STAR Market, to provide advisory and
other services or invest in those firms.
This will, in tandem with the STAR Market, facilitate the financing of
public firms, and help form systematic financial supports for technology
firms at different stages of development.
Third, to better serve small businesses and promote industrial
upgrading, Shanghai should propel the development of supply chain
finance by virtue of being home to many corporate headquarters.
A lot of medium, small and micro businesses spread in the Yangtze River
Delta region and are an indispensable part of the region's industrial
chain. The large corporations headquartered in the city are usually at
the heart of local supply chains and have close connections to the
upstream and downstream businesses of smaller sizes.
Therefore, Shanghai can roll out more favorable policies to encourage
large corporations to provide more financial services to smaller market
entities, such as offering credit loans as well as providing financing
based on accounts receivable, prepaid expense, and inventories.
The city can also initiate the push for top-level design of unified
financial regulation of the area, by leveraging the role of the Shanghai
Head Office of the People's Bank of China, the pral bank, in
coordinating financial regulatory work of different authorities within
A great deal of regulatory coordination is needed to give full play to
the role of finance in promoting economic development. For example,
regulatory coordination can help in the establishment of integrated
financial infrastructure like databases.
It is essential to build a financial information database with unified
standards across the region, using big data, cloud computing, blockchain
and other financial technologies.
The information to be collected should cover financial assets, income,
consumption and investment behavior, risk level, and other variables of
households and corporates.
As such information entails requirements of high privacy and
confidentiality, and is widely spread across real-economy businesses,
fintech, financial institutions, and regulators, it is necessary for the
government and market entities to cooperate in data collection.
One key element of the infrastructure to be built could be a unified
system for residents across the region to pay for public transportation,
water, electricity and other public services, by connecting the payment
and settlement systems of financial institutions, third-party payment
platforms and related enterprises.
Li Feng, the lead writer, is a professor with the Shanghai Advanced
Institute of Finance, which is part of Shanghai Jiao Tong University. He
is also the deputy dean of the China Academy of Financial Research.
Co-writer Hu Hao is a researcher with the CAFR.