(本文翻譯自 陳冲 金融中心之謎 2020.07.16.)
Does the proposition "Tianjin is a financial center" sound absurd? We have the impression that Tianjin, although an international port city and economic center in the northern China, compared with others like Shanghai and Shenzhen, has nothing to do with the international financial center, let alone replace Hong Kong. However, if we take a retrospective look at the history and go back to the 1860 Second Opium War, the proposition seems to prove true as Tianjin opened as treaty port. In 1882, when Shanghai was ruled by five nations, there were surprisingly nine ruling in Tianjin, including Britain, France, the United States, Germany, and Japan, called the nine foreign-controlled concessions. And ten foreign banks were established successively in Tianjin to engage in financial activities. Awkwardly, it was until 1905 that the first national bank of China, the Ta-Ching Government Bank, established in Beijing. In other words, 23 years before the establishment of the Ta-Ching Government Bank, there were already ten foreign banks in Tianjin. It was indeed a financial center, wasn’t it?
Tianjin was just a fishing village along the coast at first. So, what made it a financial center then? There were two main reasons: the market needs and the transparency and predictability of law. When China was ruled by western powers and the whole country in turmoil, foreign envoys, dignitaries, and business groups need to place their money legal (or illegal) outside the capital, but not far from their station range. Tianjin, on the periphery of the defense line, became the first choice. In addition, the nine foreign-controlled concessions also provided legal protection of their home country in China. For depositors, the transparency and predictability of the law were greatly improved. When there was a dispute, there were regulations to follow. It was the case a hundred years ago, and basic needs don’t really change a hundred years later.
Recently, after Hong Kong anti-extradition law amendment bill movement and the Hong Kong national security law, the public has been discussing who will replace Hong Kong as the international financial center? To be an international financial center, related business such as corporate financing, financial transactions, and settlement services, etc., must reach a certain scale, but the most important requisites still cling to the above-mentioned "market needs" and " transparency and predictability of the law". The latter, as we can see from Hong Kong history, is especially the necessary factor remained unchanged for a century. The Global Financial Centers Index (GFCI) releases the ranking of the world’s financial centers twice a year, which is based on five indexes: business environment, financial sector development, infrastructure factors, human capital and reputation and general factors. For the scores of the first four factors, there are no large differences among major international cities, and are ones governments can quickly boost if they want. While, the last one, reputation and general factors, is not the same and is actually closely related to political situation. In the latest ranking released in Mar. this year, Hong Kong has dropped out of the top four for the first time since the ranking first released in 2007 (in the past ten years, London, New York, Hong Kong and Singapore scored all top four). It seems that the anti-extradition movement and the social upheaval reduced the stability and attractiveness of Hong Kong as a good investment choice.
On the other hand, can Taiwan be the next financial center? In the latest ranking, Taipei dropped from 34th last year to 75th, but it had once received the ever best score, 19th, in 2010. It reminds me of the three cross-strait financial MOU signed in Nov. 2009. The reciprocal signature between two competent authorities with no other agents somewhat revealed the cross-strait friendly relationship and the possibility of good development in the future, giving the world room for imagination and thus the GFCI ranking changed. In fact, after the cross-strait financial MOU, we made efforts on EFCA and signed free trade agreements with Singapore and New Zealand. There were even rumors that we were negotiating free trade cooperation with countries such as India and the Philippines. In 2017, the former ambassador to the United States, Lyu-hsun Shen, also mentioned this history, saying that the United States was surprised that the MOU was signed and completed in a reciprocal, smooth, and non-white-glove manner. I replied him that it could only be said that it was God's will by chance. After 2011, Taipei's GFCI ranking began to descend, and the uncertainty of cross-strait relations more or less explained the reason. As for the dramatic drop to 75th this year, we should really ponder over the whys and wherefores.
Taipei has its own way. It doesn’t necessarily have to be a financial center. To become a distinctive international financial center is simple but not easy. Infrastructure construction, talent cultivation, and compliance with international regulations are those we can work hard on. The point is that whether it is a stable investment environment to the world? Or is it an unstable and risky one? To form an impression is not an easy task that can be accomplished in a short time. Nor can it be easily presented through simple numbers or slogans.