Shanghai eyes asset hub status

SHANGHAI has recently unveiled an ambitious plan to cement its status as a leading global asset management centre, targeting 55 trillion yuan (US$8.1 trillion) in assets under management by 2030 – roughly one-third of China’s projected national total.

According to China Daily, guidelines recently issued by the Shanghai municipal government is pushing to strengthen the city’s role in the global allocation and risk management of yuan-denominated assets while supporting China’s broader economic development and financial opening-up.

The plan reflects Shanghai’s growing importance as China’s financial hub and seeks to position the city at the centre of the next phase of yuan internationalisation.

Policymakers hope a deeper and more sophisticated asset management ecosystem will attract both domestic and overseas capital, enhance investment opportunities and improve risk management tools available to investors.

A key focus of the blueprint is expanding the range of investment products available in Shanghai’s financial markets.

Authorities plan to increase the supply of high-quality financial assets, including real estate investment trusts, technology-focused financing instruments and various bond products.

The city also aims to become the preferred national venue for issuing and trading real estate investment trusts.

The guidelines support listings and mergers and acquisitions involving innovative technology companies, while encouraging greater use of alternative assets and trust products.

Officials believe a broader range of investment options will help asset managers differentiate themselves in an increasingly competitive industry.

Liu Jun, deputy general manager of Huatai-PB Investments, told China Daily that product innovation is becoming essential as China’s asset management sector faces growing pressure from fee reductions and lower interest rates.

“Financial institutions could only distinguish themselves from competitors by significantly expanding their product offerings,” Liu said.

Technology is also expected to play a central role in future investment strategies.

Li Hao, chairman of BOCOM Wealth Management Co Ltd, said asset managers seeking superior returns must develop a deeper understanding of emerging technologies and pioneering industries.

He told China Daily that firms need to build more diversified and cross-disciplinary asset allocation systems, supported by stronger research capabilities in fast-growing sectors.

Alongside product innovation, Shanghai plans to strengthen its financial infrastructure and improve risk management tools.

The city intends to expand its futures and derivatives markets, including launching liquefied natural gas (LNG) futures and options and preparing for the development of electricity futures and computing-power futures.

Authorities are reportedly also planning to broaden offerings linked to equity markets, interest rates and government bonds, while introducing additional foreign-exchange products and hedging instruments.

These measures are designed to help investors manage risks more effectively and encourage greater participation from international institutions.

The guidelines further call for improved cross-border investment channels.

Proposed measures include incorporating real estate investment trusts into financial connectivity programmes between Shanghai and Hong Kong, enhancing links between interbank and exchange-traded bond markets and further opening China’s gold market.

The qualified foreign institutional investor programme is expected to be expanded, providing overseas investors with access to a wider range of futures and options products.

At the same time, qualified domestic institutional investors will be encouraged to better meet growing demand from Chinese investors seeking overseas investment opportunities.

Industry experts believe these reforms could strengthen the international appeal of yuan assets at a time when China is seeking a larger role in global finance.

Ge Qing, director of the Macroprudential Management Department at the People’s Bank of China Shanghai Head Office, said a mature and open asset management market would encourage global investors to place greater emphasis on yuan-denominated assets.

According to Ge, stronger demand for such assets would enhance the currency’s role as both an investment and reserve asset, supporting the long-term internationalisation of the yuan.

Jean Lu, chief executive officer and executive vice-chairperson of Standard Chartered Bank (China) Ltd, described the initiative as a significant step in the next phase of the currency’s global development.

Speaking to China Daily, Lu said the internationalisation of the yuan is evolving beyond its traditional role as a trade settlement currency towards becoming part of a broader global financial ecosystem.

She noted that although progress has been made in areas such as trade financing and cross-border payments, the yuan’s role in international asset allocation and central bank reserves remains below what might be expected given China’s economic influence.

The development of a global asset management centre provides exactly the real, comprehensive and sustainable application scenarios and ecosystem support needed for this evolution, Lu said.

She added that the new guidelines simultaneously address four critical areas: asset supply, risk management, investment access and financial infrastructure.

Together, these measures are intended to meet international investors’ key requirements for investability, hedgeability and financing capabilities.

“Further deepening Shanghai’s development as a global asset management centre represents a precisely targeted move amid the accelerating internationalisation of the yuan,” Lu was quoted as saying to China Daily.

“The core of the yuan internationalisation 2.0 phase is the evolution from a single-function trade settlement currency to a multifunctional financial system, building a deeper, more liquid and more convenient cross-border ecosystem.

“The development of a global asset management centre provides exactly the real, comprehensive, and sustainable application scenarios and ecosystem support needed for this evolution,” she stated.

By attracting leading domestic and foreign asset management firms, encouraging specialised development and improving access to investment products, Shanghai hopes to build a complete industry cluster capable of competing with major global financial centres.

If successful, the initiative could not only reinforce Shanghai’s standing as an international financial hub but also accelerate China’s efforts to integrate more deeply into global capital markets while expanding the global role of the yuan.