Looking for union from 'accord of men'

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Looking for union from 'accord of men'

By Hong Liang (China Daily) 09:45, August 03, 2013

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For quite sometime, Shanghai has been talking about becoming an international financial center on par with New York and London. The proposed free trade zone in the city is widely seen to have the potential of bringing its dream a big step closer to reality.

After the green light was given for the project last month, many economists and commentators have enthused about the many possibilities and predicted resounding success even though details of the plan have yet to be announced. Their comments in the media and on the Internet suggest that modern infrastructure, friendly rules and tax incentives are all that needs to create an international financial center. That's overly presumptuous.

Both Hong Kong and Singapore, which are well-established international financial centers in the region, recognized long time ago that an international financial center was built by institutions and their people more than anything else. The Singapore government invited Bank of America to establish a US dollar offshore market from which other financial services were spawned. In Hong Kong, the influx of foreign banks, including numerous merchant, or investment, banks in the 1980s to do cross-border lending and other financial businesses, underscored the city's success.

These foreign institutions brought with them not only the expertise they had accumulated in other markets, but, more importantly, global clients, including many multinational companies and large enterprises in various regional economies. Without such an international client network, it would have been impossible for a regional syndicated loan market to take hold in Hong Kong.

Of course, the large domestic institutions, notably HSBC in Hong Kong, were active participants in the building of the financial center from the start. But it didn't take long for the other smaller domestic banks to jump on the bandwagon as fund providers at first and co-managers at a later stage. In the process, they too have acquired the financial strength and expertise to compete with the big boys for a piece of the business.

Of course, none of the foreign institutions would have come if the environment were not conductive to doing offshore financial businesses. The Hong Kong government rejected the notion of incentives deemed incongruous to the economic policy, which forbade the granting of subsidies to any particular sector of industry. Instead, the government maintained that the city's advantages, including a world-class infrastructure, low taxes, free flow of foreign exchange, an equitable judiciary system and a level-playing field for all, were sufficient to entice financial institutions from around the world.

More important, of course, were the plentiful business opportunities made available by the insatiable demand for capital by many governments and private businesses of the various regional economies from Indonesia in the south to South Korea in the north to feed their development and growth. Private banking and wealth management businesses also took off in the newly established financial centers to cater for the growing number of rich individuals in the region.

As one of the most revered Chinese philosophers Mencius (372 BC-289 BC) said: "Opportunities of time vouchsafed by Heaven are not equal to advantages of situation afforded by the Earth, and advantages of situation afforded by the Earth are not equal to the union arising from the accord of Men."

It is hard to predict the "opportunities of time vouchsafed by Heaven". But it seems that Shanghai, with the backing of the central government, is doing all it can to make the most of the "advantages of situation afforded by the Earth". What it must do now is to achieve the "union arising from the accord of Men".

And that is the most important and the toughest part.

（Editor：GaoYinan、Yao Chun）