The Next Time You Think You're Perfect, Try Walking On Water Your position:Home->china news-> China Wrestles With Shaping The Future Of Shanghai The two-day Lujiazui Forum, which ended Saturday, drew more than 700 top Chinese policy makers and financial-industry professionals to discuss how the city might transform itself into a peer of Hong Kong, New York and London. In March, China's central government green-lighted Shanghai's efforts to add fresh impetus to the development of financial services amid the city's worst slowdown in decades. The Shanghai effort is a sign of China's ambition as a global power. Sustained economic growth in China and its position as the U.S.'s largest creditor during a ferocious world-wide economic downturn have given Beijing new influence in determining global financial-system policy. A higher-profile role for China is important, People's Bank of China Governor Zhou Xiaochuan said at the conference Friday. He said the current financial and economic crisis 'can't be solved under the traditional G7 structure' -- a reference to the Group of Seven leading nations, all of which are developed Western nations except for Japan. Still, Mr. Zhou also urged his fellow policy makers to set goals and a coherent strategy to capitalize on that influence through the Group of 20 nations and the International Monetary Fund. 'Do we really understand what we really need?' he said. 'What are China's suggestions and where do we stand?' How to make fuller use of trade finance, credit cards, insurance, venture capital and other straightforward products and tools dominated talk at the conference, not consideration of exotic financial innovation. One official suggested a share listing for the Shanghai Stock Exchange itself, and a banker raised the idea of bonds denominated in yuan that might be sold overseas. But policy makers seemed in no mood to push aggressively into more complicated services. 'We don't discuss universal banking,' or a financial supermarket that offers a full menu of services inside one firm, said Liu Mingkang, chairman of the China Banking Regulatory Commission. Financial derivatives, he added, 'undermined prudential regulation.' One reason the effort to turn Shanghai into a major financial center might work is that much of the world sees China's continued rise as inevitable. But the effort also will test Beijing's ability to turn opportunity into action. China should grab opportunities 'while others do introspection,' said Laura Cha, a longtime adviser to the government who is currently deputy chairman at Hongkong & Shanghai Banking Corp., an HSBC Holdings PLC unit. Few at the conference challenged the notion that Shanghai could emerge as a key finance base, but there was widespread debate about how much central-government policy makers are willing to reduce regulations that have kept the financial system underdeveloped relative to China's industrial might. The Shanghai vice mayor who holds the economic portfolio, Tu Guangshao, underscored constraints on his power to adjust policy, saying the city's plan for a financial center 'covers a wide range of issues, so [it] needs a coordinating authority at the national level to give us guidance.' For many, Shanghai won't rival other global centers until there is more scope for capital to easily move in and out of China. That essentially would require that the yuan becomes a convertible currency. Yet some participants urged Beijing not to get distracted by currency issues, maintaining that Shanghai can make big strides before it tackles risky currency adjustments. To foster what Shanghai officials call 'an enabling environment' for financial-services firms, officials note their plans to work around some central-government policies. Officials have told bankers they will implement policies that would help offset income tax rates as high as 45%, for instance, by rebating payments to high-income bankers willing to relocate to the city, according to several sources. In another move, local business-registration rules are to be adjusted so that private-equity firms can raise money in the city in ways they can't elsewhere in China, according to Fang Xinghai, director-general of Shanghai's financial-services office. 'Although it sounds simple, it's not that easy in China,' he said. James T. Areddy 
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