The City of London, also known as “the Square Mile”, is one of the world’s great financial hubs. This small area – densely populated with banks, brokers and insurers – is a vital part of the UK economy: in 2008, it contributed 4% of the national GDP.
This has not been lost on Chinese cities: there are currently 26 planning to become financial centres. This is because financial service companies are the perfect GDP driver: they occupy small amounts of space, produce high levels of taxable revenue, and they don’t pollute.
Ian Luder, the Lord Mayor of London, visited China last year. During a stop in Chongqing, he said that the city’s aspiration to become a financial hub must follow its own path: “A simple copy of the London or New York model is not feasible.”
He emphasised the need for the soft infrastructure that is required to attract professionals – such as a good living environment, international schools, and quality hospitals. And, according to at least one of Luder’s standards, Chinese cities have some way to go. The world’s financial centres have a minimum of 10% of their population working in the financial sector. In Shanghai – arguably – the Chinese city most likely to be a money hub, only 1% of locals are engaged in financial services.
Some are downright sceptical that the planners will realise their dreams. “A country cannot have so many financial centres, even the number of regional hubs in China will not be 20 or 30,” Zhang Chenghui of the State Council Development Research Center told New Weekly. (In fact, building 26 financial centres looks like another case of China creating overcapacity – see WiC49, Talking Point). While it seems plausible that some of the larger cities with developed economies – such as Guangzhou and Chongqing – could carve out a role for themselves, the plans of some of the less developed cities seem a little implausible.
Urumqi, for example, the capital of the northwest region of Xinjiang, wants to become a central Asian financial centre. Although Xinjiang has borders with eight countries – such as Mongolia, Tajikistan and Kyrgyzstan – it will have to compete with the main financial city of another one of its neighbours, Kazakhstan’s Almaty: the former Kazakh capital is bang in the middle of the central Asian region, and it even has its own stock exchange.
This kind of competition is also inevitable within China, as neighbouring cities vie for the same title: Chengdu, Chongqing and Xi’an are all, for example, fighting to become the financial hub for western China.
Xi’an plans to convert a blank patch of land outside its traditional central business district, into a financial business quarter. The Chanba Ecological Area, will offer a pleasant green environment – in contrast with the bustle of the city centre. “The environment is one of our strengths. The better it is, the greater the attraction,” Yang Liuqi, director of the Chanba Ecological Zone told New Weekly.
To be fair, Shanghai’s financial district, Lujiazui, shows that this kind of development model can succeed. Twenty years ago, Lujiazui was an unattractive plot of land in Pudong, the eastern side of the city. Now it is the China base for both domestic and international banks.
But what comes first, the existence of a financial district, or an active financial services industry? “Lujiazui, in its early phase, was supported by the government… but during this process [Lujiazui] already provided services to the Yangtze River basin and the country,” Gu Xiaoming, of the Lujiazui Working Committee recently told reporters. “The relationship between chicken and egg is difficult to make clear.”
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