The Main Driving Force of an Emerging International Financial Center in China

Functionally, an international financial center is supposed to at least allow for and facilitate international finance, global investment, international payment, settlement, and financial transactions. It should also have the capital asset pricing power in the global market. To enable these essential functions, such a center needs the capital market as a platform at its core. The history of global capital markets shows that securities firms that came into existence along with the development of capital markets are the best medium for capital markets to function. China will be the new location of international financial centers, and Chinese securities firms will become the main driving force of an emerging international financial center in China. This will provide public companies and investors with a full range of financial services and direct participation in various market activities.

International Finance-Related Services

Due to their asymmetric format, commercial banks are the main players in indirect financing activities, whereas securities firms are the most important intermediaries to promote direct financing. The reality in China is that commercial banks still dominate the market. This goes against the market forces and the emergence of an international financial center. To help such a center emerge, China should cause considerable quality assets to be tradable in the Chinese capital market, including allowing a number of foreign companies to be listed on the international board of the Chinese stock market. This requires that Chinese securities firms go for every opportunity of strategic development in the next decade. They need to continue to help the capital market increase the means of finance, and also offer China-based finance-related services to foreign companies, enabling global finance and faster internationalization in the Chinese capital market. Chinese securities firms have the advantages of strong marketing and financial support, as well as a better understanding of related Chinese laws and regulations and IPO processes. By making the best of these advantages, Chinese securities firms can help companies design standardized financial products and raise funds directly in the capital market for further business growth.

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