SSE: Being a Good "Service Provider" and "Pioneer" in Building Shanghai into an International Financial Center

Translated from Shanghai Securities News

Shanghai's influence as an international financial center has grown significantly over the past 15 years. As it pivots towards a comprehensive upgrading of the international financial center, the newly revised Regulations of Shanghai Municipality on Promoting the Construction of International Financial Center (hereinafter referred to as the Regulations) has come out right on time and is expected to power Shanghai's endeavor to spur high-quality development through a strong financial sector.

A robust local financial factor market is indispensable to the upgrade of Shanghai's international financial center. As a national financial factor market, Shanghai Stock Exchange (SSE) has come to be a driving force for cementing Shanghai's status as an international financial center by firmly fulfilling its own responsibilities and giving full play to the role of the capital market.

"In recent years, the SSE has contributed to the growing competitiveness and influence of the international financial center of Shanghai not only by being a 'service provider' but also a 'pioneer'." Wang Bo, executive vice president of the SSE, said in an exclusive interview with Shanghai Securities News. Wang Bo commented that the revision of the Regulations is of great significance to further enhancing Shanghai's status as an international financial center, promoting high-quality financial development, and accelerating the building of national financial strength.

Shore up our weak spots and explore new paths

Step up building a new hub of opening-up

The Central Financial Work Conference highlighted the importance to "boost the competitiveness and influence of Shanghai as an international financial center", and the Third Plenary Session of the 20th CPC Central Committee explicitly called for move(ing) faster to build Shanghai into an international financial center".This cause has been steady and fruitful on the whole. Notably, a high-quality capital market is an important gauge of openness of the international financial center. Capital market is also a frequent topic in the chapter on financial reform and opening-up of the Regulations, which reflects the higher expectations put on the capital market to upgrade the international financial center.

According to the Regulations, the Shanghai Municipal People's Government should support the central financial authority to promote high-quality development of the capital market, deepen the registration-based initial public offerings (IPO) reform, align the STAR Market to higher standards, and improve rules in issuance and underwriting, equity and bond financing, M&A and restructuring, market trading, equity incentives, and delisting supervision on the STAR Market. Local financial departments in Shanghai should, in collaboration with relevant municipal departments and district-level governments, strengthen coordination and provide services to listed companies and listing candidates through digital service platforms in incubation and cultivation, listing coaching, compliance management, high-quality development, risk prevention, etc.

In Wang Bo's view, the revision of the Regulations holds significance in two aspects. First, it helps to further "shore up our weak spots". To enhance the competitiveness and influence of Shanghai as an international financial center, the document explicitly proposes to "expand high-level financial opening up" and "increase the transparency, stability, and predictability of financial opening-up policies". These measures will help fortify the weak spots of Shanghai as an international financial center in high-level opening-up, promote internationalization of the financial market, and further facilitate cross-border investment and financing, thereby stepping up the pace to foster a new hub of opening-up.

Second, the revision of the Regulations facilitates "exploring new paths". Shanghai has always been at the forefront of the reform and opening-up of China's financial market. The revised Regulations proposes measures such as "deepening the reform of the registration-based IPO system and aligning STAR Market to higher standards" and "promoting the listing and opening-up of more futures and options". These measures collectively reflect a commitment to accelerating innovation to power development, deepening reform to drive upgrading, giving full play to innovation in key areas of growth, and better integrating global financial resources.

Strive to be a "pioneer" while serving as a good "service provider"

In the past few years, the SSE has been thoroughly implementing the decisions of the CPC Central Committee on establishing Shanghai as an international financial center. Under the guidance of the CPC Shanghai Municipal Committee and Shanghai Municipal People's Government, and in accordance with requirements of China Securities Regulatory Commission (CSRC), the SSE has assumed dual roles as both a "service provider" and a "pioneer", and has assisted Shanghai in enhancing its competitiveness and influence in three aspects.

First, deepen the reform of the registration-based IPO system and the STAR Market to drive high-quality development of the capital market. In April 2023, the first 10 registration-based IPOs were adopted on the main boards of Shanghai and Shenzhen stock exchanges, marking the full-on implementation of the registration-based IPO reform. In recent years, under the leadership of the CSRC, the SSE has made continued efforts to innovate key systems in issuance and listing, follow-on offering, M&A and restructuring and information disclosure, which helps further strengthen the registration-based IPO reform. Over the past five years since its opening, the STAR Market has served as a testing ground of reforms to improve institutional inclusiveness and adaptability and channel more favoring factors towards scientific and technological innovation.

Second, enhance capacity to allocate global resources. In recent years, the SSE has steadily promoted high-level opening-up of the capital market and its internationalization strategy. It has widened the scope of stock coverage under Shanghai-Hong Kong Stock Connect, refined depository receipts under the stock connect scheme, and promoted ETF connectivity cooperation. Furthermore, it has enhanced the function of bond market to allocate global resources, broadened the access for overseas capital to the exchange bond market, and sped up issuance of BRI bonds to serve the development of the initiative.

Third, facilitate the building of an international green financial hub. It is worth mentioning that the SSE has delivered initial results in building a sustainability information disclosure system. In April this year, under the guidance of the CSRC, the SSE released guidelines on sustainable development reports, aimed at standardizing the disclosure of sustainability-related information of listed companies. Meanwhile, the SSE has met reasonable financing needs of qualified companies operating in green and low-carbon, renewable energy and other businesses. Up till today, 36 energy conservation and environmental protection enterprises and 29 new energy enterprises have been listed on the STAR Market. In addition, the SSE has revised its guidelines on green bond review to promote the issuance of green bonds and ESG corporate bonds under the BRI.

Capitalize on the role of the capital market

Facilitate the building of Shanghai into an international financial center

With the blueprint in place, the SSE is ready to set sail. The newly revised Regulations provides detailed normative guidelines for comprehensively elevating Shanghai's status as an international financial center, and also offers a legal support for Shanghai to better serve the national strategy of building a financial powerhouse. Looking ahead, how will the SSE leverage its functions to bolster the competitiveness and influence of Shanghai as an international financial center?

According to Wang Bo, the SSE will fully implement the decisions of the 20th CPC National Congress, the Third Plenary Session of the 20th CPC Central Committee, and the Central Financial Work Conference, and follow through on the Several Opinions of the State Council on Strengthening Regulation, Preventing Risks and Promoting the High-Quality Development of the Capital Market and its supporting systems, as well as the Regulations. By fulfilling its responsibilities, it will better leverage the role of the capital market to help establish Shanghai as an international financial center.

First, the SSE will continue to deepen the reform of the capital market and channel more resource factors to new quality productive forces. The SSE will accelerate the implementation of the "STAR Market Eight Measures", further enhance the inclusiveness and adaptability of the capital market to drive scientific and technological innovation, improve the function of the capital market to maintain a balanced growth of investment and financing, and leverage the role of the STAR Market as a testing ground of reforms, all under one commitment to fostering world-class high-end industrial clusters that are crucial to power new quality productive forces and national strategies.

"As the next step, the SSE will continue the implementation of the 'STAR Market Eight Measures', further deepen the reform of the STAR Market, and strengthen the STAR Market's purpose of serving the 'hard tech'. While providing more precise and inclusive support for enterprises engaging in new quality productive forces, the SEE will also advance institutional reforms across the board, encourage integration of companies along the industrial chain, and guide investment in early-stage and small companies, in the long term, and in hard technology, so as to better spur growth of new quality productive forces and contribute to the building of 'five centers' in Shanghai," said Wang Bo.

Second, the SSE will provide high-quality capital market services to boost economic and social development and further enhance Shanghai's status as an international financial center. The SSE will continue to promote high-quality development of listed companies, carry out the special action of "corporate value and return enhancement", and take multiple measures to revitalize the M&A and restructuring market. It will also speed up investment-side development by launching broad-based indexes and ETFs, improving the global market index system, and attracting more medium- and long-term capital domestically and internationally through high-quality development of the capital market. It will work to develop scientific and technological finance, green finance, inclusive finance, pension finance, and digital finance, and promote the pooling of resources in major strategies, key areas, and weak links, such as scientific and technological innovation, green and low-carbon development, and inclusive livelihoods.

Finally, the SSE will pursue openness while ensuring security in its efforts to promote high-level institutional opening-up of the capital market. The SSE will further promote the connectivity mechanism and continue to optimize depository receipts under the stock connect scheme. It will encourage more overseas institutional investors to enter the exchange bond market via CIBM Direct, improve BRI-related financial services, and further facilitate cross-border investments by domestic and foreign investors. Additionally, it will further support the building of an international green financial hub and help elevate Shanghai's status in this regard.

The above information is provided for reference purposes only and does not constitute investment advice.