(Yicai) June 18 — Shanghai and Hong Kong inked a joint action plan on the occasion of the opening of the Lujiazui Forum today, aimed at promoting the coordinated development of the two financial hubs, enhancing their respective strengths and increasing China’s influence in the global financial system.
The Action Plan for Collaborative Development of Shanghai and Hong Kong International Financial Centers outlines 38 measures across six main areas. These include better linking of their financial infrastructure, co-developing financial products and services, and strategically complementing each other in offshore finance.
The two cities plan to keep improving cross-border investment channels such as the Bond Connect and Swap Connect. They will also explore new areas of cooperation such as cross-border clearing, interconnection of gold trading, new application scenarios for the digital yuan in cross-border payments, and helping Shanghai financial firms to expand into the reinsurance sector through Hong Kong.
Shanghai and Hong Kong will link arms on expanding the use of artificial intelligence and blockchain technology in asset management, insurance and payment processing, according to the action plan. They are also committed to creating policies that better support the development of tech startups.
Shanghai and Hong Kong can learn from how London and New York work together as global financial hubs, and make full use of China’s strengths in data and digital tech to power innovation in the offshore financial sector, Sheng Songcheng, professor of economics and finance at the China Europe International Business School, said at the forum.
This partnership is expected to build a ‘double-circulation’ regulation model for the onshore and offshore yuan in terms of institutional innovation. This is especially important as the US dollar fluctuates and could give China a greater voice in global finance.
Turnover at Shanghai’s financial markets soared 8.2 percent last year from the year before to CNY3.6 quadrillion (USD508.1 trillion). The Shanghai Stock Exchange ranks third in the world in terms of market capitalization and fifth in terms of trading volume. Its interbank bond market is the second largest in the world.
Around 70 percent of Shanghai’s cross-border transactions are settled in yuan, amounting to half of the country’s total, making the city a key global hub for yuan-denominated asset allocation.
Hong Kong had redback deposits of CNY1.1 trillion (USD153.1 billion) as of the end of last year. This provides important liquidity for offshore yuan trading. Hong Kong’s yuan real-time payment system handled an average of CNY3 trillion (USD431.2 billion) a day in 2024, a jump of 50 percent from the year before. It processed around 75 percent of all the world’s offshore yuan payments, consolidating its position as the globe’s largest offshore yuan liquidity pool.
