People who have been to the north shore of Dishui Lake a year or two ago will definitely not believe that a financial city comparable to Lujiazui and the Bund will rise on this empty meadow. But now that the old place is revisited, there are tower cranes on the shore, and hundreds of workers are involved in the construction of the “jiugongge” office building. Financial institutions and enterprises such as the five major banks of the Industrial and Agricultural China Construction Diplomacy have signed building purchase agreements. More than 500 licensed financial institutions, new financial institutions, investment enterprises and financial functional institutions will settle in the future.
The north shore of Dishui Lake before the start of construction. Photo by Meng Yuhan
However, there are still people who are curious. Shanghai already has several mature and high-level financial clusters. Why should another financial bay be built?
The reason can be seen from the latest financial “14th Five-Year Plan” released in the Lingang Special Area. The plan proposes that the Dishui Lake Financial Bay will complement and develop in coordination with the Lujiazui Financial City and the Bund Financial Cluster to build a new pattern of “one city, one belt and one bay”. For Lingang, the implementation of deep-differentiated financial policy exploration, further promotion of financial opening up and the internationalization of the RMB, and continuous strengthening of the function of global financial resource allocation are all within the meaning of the question.
At the 13th Lujiazui Forum that opened recently, Pan Gongsheng, Vice Governor of the People’s Bank of China and Director of the State Administration of Foreign Exchange, revealed that soon, pilots of high-level foreign exchange management will be launched in the Lingang Special Area to promote high-level foreign exchange management.
Related policies have been introduced one after another. Whether it is the “Implementation Opinions on Further Promoting the High-quality Development of the Service Industry in the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone,” which focuses on top-level design, or the “Comprehensive Promotion of the China (Shanghai) Pilot Free Trade Zone’s Temporary Development”, which implements specific supporting policies or the “Several Measures for Financial Opening and Innovative Development of Lingang Special Area” all directly refer to the fields of cross-border capital and offshore business, and have promoted a batch of breakthrough innovations.
In August last year, Shanghai Lingang Economic Development (Group) Co., Ltd. successfully introduced US$100 million in overseas financing through two cooperative banks, namely, the Industrial and Commercial Bank of China, Shanghai Xinpian Branch and Ping An Bank, Shanghai Free Trade Zone. With “hedging” to lock in the exchange rate, Lingang Group was able to significantly reduce the comprehensive financing costs. Multinational companies have also seen the prospect of setting up a capital management center in the special area.
When GALAXYCORE INC., the overseas parent company of Geke Microelectronics (Shanghai) Co., Ltd., planned to list on the Science and Technology Innovation Board, the Pre-IPO round of financing involved an employee equity incentive plan. According to past practices, more than 300 employees participating in the equity incentive plan must register with the State Administration of Foreign Exchange for purchasing foreign exchange. Due to the large number of people, it would be extremely time-consuming and troublesome to handle. In order to allow Geke Microelectronics to go public and complete the financing earlier, relevant personnel from the Financial and Trade Office of the Management Committee of the Special Area and China Merchants Bank had accompanied the company to visit the State Administration of Foreign Exchange (SAFE) many times. After many rounds of discussions, the innovative financial method of using Geke’s domestic equity company to purchase foreign exchange on behalf of employees and then exit the country quickly and efficiently solved the problem of all employees registering to purchase foreign exchange.
At present, the Lingang Special Area has facilitated cross-border RMB settlement and recommended 312 high-quality companies to be included in the whitelist, registered a one-time foreign debt quota of approximately RMB 928 million, and 6 companies have piloted the integration of domestic and foreign currencies in a cross-border capital pool. Zhongyang Shengan Investment Co., Ltd. with a registered capital of USD 17.5 billion was registered and established. 109 financial projects such as the Bank of Communications Financial Technology and the China State-owned Enterprise Mixed Ownership Reform Fund and 17 trade projects such as Hanling (Shanghai) Trade were launched. 15 banks have set up branches in the zone, with the total capital scale of registered and signed funds exceeding 261.4 billion yuan.
However, innovation and breakthroughs are always accompanied by risks. In the case of Geke Microelectronics, innovative methods have made the funding path clearer and more traceable, which not only solves problems for the enterprise, also popularized a blueprint for other similar enterprises. It is necessary to actively explore fintech regulatory innovations and explore the application of new technologies such as artificial intelligence, big data, cloud computing, and blockchain in the financial field to create a pilot port for fintech innovation with international influence.
The use of fintech for risk prevention and supervision is also an innovative breakthrough. Behind this is a more forward-looking and inclusive compound thinking. The application of this kind of thinking to various fields other than finance is the first driving force for the Lingang Special Area to experiment and venture boldly, to reform independently, and become the first of its kind in the world.