China on Wednesday elaborated on plans to build Shanghai into an international financial and shipping center, with pledges to gradually allow foreign companies to list in Shanghai and let overseas firms issue yuan-denominated bonds.

Global financial hub

The country was aiming to make Shanghai an international financial center in accordance with the country's economic strength and the international status of its currency by 2020, according to plans published on the central government's website by the State Council.

The nation would develop a multi-functional and multi-layer financial market in Shanghai with the introduction of more financial products, instruments, derivatives and futures, according to the plans.

China would not hesitate to introduce new financial products and services, or flinch from financial innovations, despite the global financial meltdown, Liu Tienan, deputy head of the National Development and Reform Commission (NDRC), said at a press conference in Shanghai.

However, the security and stability of the financial system would be prerequisites for such innovation efforts and reforms, he added.

The country would gradually increase yuan-denominated bond issues by international development agencies, according to Wednesday's detailed plans.

In addition, it would steadily work to allow foreign companies to issue yuan-denominated bonds in Shanghai, and would let some foreign firms list in Shanghai "at a suitable time."

Liu stressed that the goal was to build an international financial center in Shanghai that matched the status of its economic strength and its currency.

He said attempts to make the yuan an international currency still faced difficulties, citing China's strength in terms of per capita GDP, developing financial systems, the industrial restructuring yet to be achieved to make its manufacturing more powerful, and the country's overall competitiveness.

"Free convertibility of the yuan, ... involves many factors, and there is hardly a timetable for that," said Liu.

He said the international status of the yuan had been improving, citing the country's currency swap with trading partners and the trial of international trade settlement in yuan.

Since mid-December, the Chinese mainland has signed currency swap contracts worth 650 billion yuan ($95.6 billion) with Hong Kong, the Republic of Korea, Malaysia, Belarus, Indonesia and Argentina.

China announced a pilot program this month to allow exporters and importers in five Chinese cities, including Shanghai, to settle cross-border trade deals in yuan.

Global shipping center

The State Council said Wednesday the country would also build the eastern metropolis into a global shipping hub able to allocate international shipping resources by 2020.

The nation would continue to improve infrastructure at the Shanghai port while integrating neighboring resources in the Yangtze River Delta, promoting shipping services by lowering transfer costs for containers from across the world, while striving to enhance the competitiveness of domestic shipping firms, according to the plans.

It would extend the deadline of tax shelters for domestic ships under flags of convenience from June 30, 2009, to June 30, 2011, and it may initiate tax rebates for ports of departure.

Wu Minghua, head of Shanghai division of Maritime China magazine, hailed the measures as "major policy breakthroughs" that could open up China's high-end shipping services.

The country would also develop higher-end financial services for the construction of a global shipping hub in Shanghai.

China would allow major domestic shipping companies to set up financial leasing firms, and actively and steadily encourage such firms to trade and issue bonds on the Shanghai-based inter-bank market.

It would also allow international cruise operators to register and establish agencies in Shanghai to operate approved international cruise lines.

Zhang Yun, president of the Shanghai Shipping Exchange, said a global shipping center and an international financial center were complementary.

He said existing international financial centers also served as global shipping centers almost without exception, such as London, New York and Hong Kong.

Wednesday's detailed plans followed the announcement made by the State Council in late March, when the government announced it would build Shanghai into an international financial and shipping center.

"Shanghai has relatively complete financial systems, a strong manufacturing base and technological innovation capabilities, and advanced modern shipping infrastructure networks," say the detailed plans.

Shanghai has the country's only shipping exchange, and the country's currency exchange is headquartered in the city.

The stock exchange in Shanghai had the world's seventh and Asia's second largest turnover in 2008. The city's port is the world's busiest with its cargo throughput of 580 million tons in 2008. The port was ranked the world's second for handling 28 million standard containers last year.

NDRC's Liu also said that Hong Kong's status as the global financial and shipping centers would not change in the short term while China stepped up development in Shanghai.

Shanghai and Hong Kong targeted different groups of customers, and they were at different levels in terms of financial sophistication and shipping scale, he said.

(Xinhua News Agency April 30, 2009)