A woman shows banknotes and coins included in the 2019 edition of the fifth series of the renminbi. (Photo/Xinhua)
In a document on the future development of Pudong the central authorities issued on July 15, the Shanghai district is required to improve its financial market, financial products, financial agencies and financial infrastructure, and take full advantage of the central authorities’ support, to develop offshore renminbi trading, cross-border trade settlement and overseas financing services.
Judging from the development process of more than 40 years of reform and opening-up, Pudong has not only become a domestic financial center, but also a new financial star in Asia. Now the main direction for Pudong’s development is to continue to promote the renminbi’s use as a settlement currency and its cross-border use through the opening of onshore international business and the innovation and cultivation of offshore business. It should also establish itself as a global asset management center to increase the renminbi’s position as a reserve asset in the international financial market.
It is necessary to increase the renminbi’s role as a reserve currency by improving its ability to serve offshore businesses, as well as its pricing status of global currencies and assets. The crux is to consolidate renminbi’s status as an international currency. The business related to renminbi should be expanded to overseas markets to not only diversify but also increase the amount of the offshore businesses of renminbi. To make Pudong an international financial center, it has to improve the financial infrastructure facilities for the internationalization of the renminbi.
The opening up of renminbi capital accounts must be based on the precondition that the ability of China’s finance to serve the real economy has markedly improved. If finance does not serve the real economy, the opening up of the capital accounts will probably be taken advantage of by speculators to prey on the country’s foreign exchange reserves to convert renminbi to the US dollar.
So the opening up of the financial sector in Pudong must be carried out with tremendous prudence, and it should be done step by step.
Pudong should continue to give full play to its unique strengths in having multi-layer capital markets, being a stage for more and more international financial agencies, and being a trailblazer of the country’s financial opening-up and innovation.
The tremendous space the Shanghai Pilot Free Trade Zone, which is also located in Pudong, enjoys to explore breakthroughs represents favorable factors for Pudong to build itself into an international financial center.
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