China, UK can work on finance opportunities, risks

Source:Global Times Published: 2018/5/29 21:13:40

Catherine McGuinness Photo: Sun Wei/GT

Editor's Note:

China is a firm supporter of globalization. The Belt and Road (B&R) initiative has now connected more than 100 countries and international organizations, providing numerous public benefits and opportunities. And since the 2018 Boao Forum for Asia, China has been engaging in further opening-up, with a focus on the financial sector. Against this backdrop, the 10th Lujiazui Forum 2018 will be held in Shanghai on June 14 and 15 with the theme of "Shanghai's development toward an international financial center in the new era." Global Times London Correspondent Sun Wei (GT) interviewed Catherine McGuinness (McGuinness), chairman of the Policy and Resources Committee under the City of London Corporation, before her trip to Shanghai to attend the Lujiazui Forum. The two of them discussed China's opening-up and the City of London's role in the B&R initiative.

GT: This year marks the 40th anniversary of China's reform and opening-up, and is also the 10th anniversary of the international community's fightback against the global financial crisis. How can China better prevent and control financial risks?

McGuinness: The crash had implications for the whole world. What has developed in response to the crash is a set of regulating principles around how banks and other institutions should be capitalized, how risks should be managed, and whether the global standards still fit modern risks. It's a scenario that requires a dialogue, and regulators need to talk to each other. For example, one of the biggest risks is cyber security. Regulators need to work on it.

There is a balance to be found between risks and opportunities during the process of opening-up. Working together and recognizing some of the global standards are what we look forward to. And with President Xi Jinping's remarks about further opening-up at the Boao Forum, it's a very propitious time.

There are great risks in global finance, but there are also huge opportunities if China wishes to realize visions such as the B&R, working with the rest of the world in a measured way. We are very pleased to see some institutions take advantage of China's opening-up, such as JP Morgan's move to take a 51 percent stake in its Chinese joint venture. There are many great international institutions that want to engage more closely with China in the newly opened environment.

GT: Shanghai is seeking to build an international financial center, and is leading the Yangtze River Delta to build a world-class urban agglomeration with global influence. The City of London, known as "the square mile," is the symbol of a financial center for the UK, Europe and the world. What kind of experience can the City of London provide for Shanghai?

McGuinness: We have a very long relationship with Shanghai. We are very open to discussions on how we can share lessons on the financial ecosystem with each other.

London has been the world's leading financial center for a long time. Shanghai, meanwhile, is growing quickly. Some of the depth and breadth we have here in the City gives us an edge.

One of the reasons why London is a great financial center is that it hosts institutions from all over the world. It also has a great mix of business, culture, new technology, and other forms of creative energy. China's globalization and further opening-up can make it easier and more attractive for global institutions to build interests there and base themselves in China. That's important for Shanghai to become a global financial center.

I am looking forward to seeing the London-Shanghai Stock connect coming into operation. There is a great deal that London and Shanghai can do regarding the B&R initiative, such as looking at how to bring in private finance, deepening of the yuan's internationalization, green finance and Fintech.

GT: The report from the 19th CPC National Congress pointed out that socialism with Chinese characteristics has entered a new era. It prioritized high-quality development, as opposed to high-speed or large-scale development. To achieve high-quality development, an efficient financial system is essential. How can finance better serve the real economy and promote growth?

McGuinness: The cautious and gradual way in which China has opened up has been understandable, because it provides a good foundation to build on.

Seeing the equal footing that will be given to overseas and domestic firms once the reforms are implemented will give overseas firms a great deal of confidence about engaging more with China. There are further steps that could be taken, such as barriers in legal practices. It would be great to see some relaxation and development there. But I think the direction of travel is very positive.

Finance drives everything in our economy. You need a financial system to enable business. The financial sector is crucial for people to conduct everyday life, provide pensions, and run businesses. When we think about our industrial strategy and how we are going to build our innovative skills, we need a financial system to support entrepreneurs and innovators so that they can develop their products and grow that part of the economy.

GT: The UK is a supporter of China's B&R initiative. With further development, there will inevitably be higher requirements for services from financial markets and financial institutions. How should financial institutions participate in the B&R initiative? What kind of financial risks need attention and prevention?

McGuinness: From the City's perspective, we have a full range of supporting services for the B&R initiative. This is a great center for infrastructure and project management.

The challenge is the financial risks involved. One reason why a number of countries haven't been able to realize the planned B&R infrastructure projects is the political risks or credit risks involved. The private sector on its own hasn't been willing to invest in those projects. One of the challenges will be structuring the financing of the projects so that there is a fair spread of financial risks. Political and credit risks must also be managed in some way. These projects really need to be investible for the private sector to come and contribute. They can't just be state funded.

GT: Technology is fundamentally changing financial services. The UK is recognized as the center of world financial technology, and China has developed rapidly in this industry as well. What kind of cooperation and investment opportunities exist between the two countries?

McGuinness: There is a lot we can learn from China, in the area of mobile payment for instance. We also have built several Fintech bridges with China.

Apart from sharing and learning about the sector itself and how one can roll out some of the innovations that have worked in China, there's specialism here in Fintech. We have advantages in the way that we have close relations with regulators in this sector and the financial sectors that are supporting it, and universities. This is a place where startups can come and raise money and capital for developing their ideas further.

GT: You are going to Shanghai next month to attend the Lujiazui Forum. What are your expectations for it?

McGuinness: I am very much looking forward to it. I am sitting on a panel with very high-profile figures, discussing economic growth and the development of financial governance. It's a very important time to be looking at that as China is globalizing, and it has been 10 years since the financial crash, which had worldwide implications. It's going to be a very interesting discussion. We could hear what's on China's opening-up agenda, which is taking strides forward at the moment.


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