ACCELERATE THE DEVELOPMENT OF SECURITIES INDUSTRY, PROMOTE THE CONSTRUCTION OF SHANGHAI AS AN INTERNATIONAL FINANCIAL CENTER

The competition between Shanghai Stock Exchange and Shenzhen Stock Exchange came into being at the time of their creation. The geographical advantage of Shenzhen that it abuts on Hong Kong and the pioneering spirit of its citizens make its stock market superior to that of Shanghai in system innovation and construction.

The outline of the 10th five-year plan expounds clearly that it is the national strategy to accelerate the construction of Shanghai as the international financial center, which provides advantageous political conditions for the development of the Shanghai securities industry and greatly enhances its appeal to domestic and foreign securities institutions.

China's entry into the WTO means China must abide by its agreements and open up all financial industries including the capital market, step by step on the basis of fair competition. The introduction of foreign experience and technology will shorten the gap between Shanghai and international front edges. The increasingly fierce competition will also drive domestic securities companies to restructure or upgrade their organization, technology and management, thus bringing Shanghai's financial institutions in line with the international practice.

Considerations for consolidating its central position in the domestic securities market

The competitive edge of local securities companies and Shanghai's appeal to domestic and foreign securities institutions should be enhanced.

Recently, securities companies have increased capital and stock issuing, leading to their change of registration sites to Shenzhen and Shanghai. Meanwhile,many foreign securities companies have set up branches in Shanghai. Such an opportunity should be taken advantage of to create an attractive business environment.

Securities institutions registered in Shanghai should be developed under a unified plan and leading securities companies should be cultivated.

The establishment of Shanghai's status as the center of the domestic securities market relies most on the scale and amount of Shanghai-registered securities companies playing a leading role nationally. In addition, as the centralized registration site of national securities companies, Shanghai should set up a management department, which takes charge of unified planning for the development of the securities industry, promotes mergers and acquisitions among securities companies to enhance their international competitive edges, coordinates between domestic securities companies and their foreign counterparts to prevent vicious competition, and creates positive conditions for the listing of local securities companies.

Traditional brands of local securities companies should be protected.

Foreign securities companies have an advantage over domestic ones by their brand power, such as the names of Merrill Lynch and Morgan Stanley. The brilliance of Shanghai's traditional brands requires support from government departments, besides the efforts of the securities companies themselves.

A unified supervisory system on foreign capital inflow should be established in Shanghai's financial industry.

The inflow of foreign capital to the domestic capital market through banks is unperceivable. Under the supervisory system of segregation, supervision departments only pay attention to the foreign capital flow of their own systems without effective supervision on the inter-system foreign capital flow. Shanghai municipal government should set up a unified supervisory system on foreign capital flow with the cooperation of local financial systems to reduce potential threats faced by the capital market.

Cooperation among banking, securities, trust and insurance industries should be promoted for the development of securities industry.

Cooperation among financial industries is of great significance. Firstly, the cooperation can lay a foundation for mixed operation in the future. Secondly, financial industries can share resources and take advantage of each other's strengths. Each financial industry has its own advantage, which is quite complementary to each other, such as the customer network of banks, funds of insurance companies, and technology and business of securities companies. Thirdly, the penetration of non-securities financial institutions into the securities industry can accelerate the further division and specialization of the securities industry.

(by Dr. Feng Guorong, President, Shenyin&Wanguo Securities Co., Ltd.)