As bridgehead, Shanghai seen playing exemplary role in Belt and Road initiative
REPRESENTATIVES from international think tanks, government organizations and enterprises aired their views on how Shanghai could give fuller play to its bridgehead role in serving the country’s Belt and Road initiative at the 2017 Shanghai International Think Tank Summit held in Shanghai on November 24.
The summit was hosted by the Development Research Center of Shanghai Municipal People’s Government, and undertaken by Shanghai International Think Tanks Exchange Center, the Boston Consulting Group (BCG) and Shanghai Development Research Foundation.
The summit was in response to President Xi Jinping’s statement that China (Shanghai) Free Trade Zone should become a bridgehead for the country’s B&R initiative and help market entities go global.
Insights and suggestions from the summit would go a long way toward shaping future policies in areas ranging from investment and trade, science and innovation, financial openness to cultural exchanges.
Qi Wu, a senior managing director and vice chairman from Accenture, stressed the importance of digital infrastructure as key to promoting the B&R initiative that can significantly facilitate international investment and trade. Wu observed that as a result of globalization and digitalization, the traditional trade and logistical centers, as represented by Shanghai, are witnessing fundamental changes as they evolve into digitalized trade centers — as represented by Singapore — marked by efficient, digitalized platforms and continual innovation.
Wu pointed out that according to the latest World Economic Forum’s Enabling Trade Index, which evaluates economies’ capacity to facilitate the flow of goods over borders and to their destination, Singapore is ranked first, Hong Kong (China) is ranked third, while China’s mainland is ranked 61. “This suggests considerable room for improvement in facilitation of trade in China, and Shanghai could play an exemplary role in this respect,” Wu observed.
Wu cited the need for Shanghai to digitalize its platforms concerning executive control, standards, trade, investment and financing, so that it could command the vantage point of digitalization in the process of pushing forward the B&R initiative.
Elton Huang, PwC Central China Markets Leader and PwC Shanghai Senior Partner, drew attention to Shanghai’s leading role in financial openness in furthering the B&R initiative, citing the emphasis of hardware, to the neglect of software, in local development.
In the latest edition of Z/Yen’s Global Financial Centers Index (GFCI 22), which evaluates competitiveness and rankings for the major financial centers around the world, Shanghai is ranked in the 13th place, well ahead of other financial centers along the Belt and Road region. Compared with well-established centers like New York, London, Singapore and Hong Kong, Shanghai has shown competitiveness in market growth, economic development, and innovation, but there is still considerable gap in terms of business environment. Specifically speaking, Shanghai still lags behind in financial areas such as taxation, government regulation, customer confidentiality, economic openness, start-up environment, and business risks.
“Compared with established financial centers, Shanghai no longer lags in quantitative terms whether it is stocks, bonds or commodities and futures markets, but there is room for improvement in terms of quality, as well as in terms of the openness of the financial market, financial regulation and legal environment,” Huang observed.
Any attempt at amelioration has to be conceived against the overriding state call for reducing financial leverage in order to lower systemic risk.
Huang believed Shanghai could take advantage of the Belt and Road Initiative in pushing further its financial openness. According to estimates, infrastructural investment along the Belt and Road countries during 2016-2020 would amount to over US$10 trillion, far beyond the financing capacity of banks and financial institutions combined in the region. Hence the challenge to provide adequate financing in promoting the initiative. It will also provide unique opportunities for Shanghai in its aspiration to become a leading global financial center.
In her speech, Ioana Kraft, General Manager of Shanghai Chapter, European Union Chamber of Commerce in China, used three words to symbolize how Shanghai could synergize its local strategies — reciprocity, connectivity and mobility. She explained them as:
Reciprocity: As the very purpose of the B&R initiative is to link all countries along the region and promote exchange between them, it should not be a one-way road.
Connectivity: The basic function of a road is to connect one place with another and facilitate free flow of goods. This is particularly true for the Initiative as trade facilitation lies in its core.
Mobility: The ultimate purpose of a road is to connect and enable mobility of people. Shanghai fully recognizes the importance of talent attraction and retention, particularly as it envisages itself as a future global innovation center.
She pointed out that in the era of knowledge and information, the Belt and Road Initiative should not only promote the physical flow of goods and people, but also serve as a vehicle that drives a fast and stable flow of information.
“Only if talent and free data flow is ensured can Shanghai truly thrive as a knowledge-based, international business and innovation center,” she added.
She concluded her speech by saying that “as part of European business in China, we have every reason to support and embrace this initiative that mutually benefits Europe and China. We are willing to contribute our knowledge and efforts as a channel between the government and European business community to help Shanghai better play the leading role in the Belt and Road Initiative that it deserves.”
Minghua (Dora) Liu, Managing Partner of Eastern China, Audit Partner of Shanghai, China, Deloitte, believes that for Shanghai to play a better role as a bridgehead in promoting the Initiative, it should show more openness and far-sightedness in envisioning its future, as its stress shifts to innovation and standard building rather than the traditional idea of attracting investment.
Attracting the talent
Amano Hiroyasu, Vice President of Nomura Research Institute Shanghai Limited, focused his attention on the challenge of cultivating and attracting global management talent. He pointed out that there have been many instances of Chinese enterprises going into mergers and acquisitions overseas. Unfortunately, in the wake of the M&A’s, these enterprises often fail to transplant overseas technology or model into the venture, and there have been few instances of successful transfers of Chinese corporate culture or philosophy into the ventures. This resulted in business failures, often followed by sellout or transfers of equity.
This, according to Hiroyasu, is due to lack of globalized managerial talent.
Shanghai is home to numerous foreign enterprises with a huge pool of international talent. But these professionals are mostly more adept at developing Chinese market, or economic and trade professionals specialized in investing overseas, or marketing Chinese products or services overseas. Hiroyasu observed that there is comparative lack of professionals who have the expertise needed in the development of the B&R initiatives.
To fill in that space, Chinese companies have to develop their own strategy in view of their own special conditions. For instance, Japanese companies, due to its relatively low employee turnover rate, usually have in place a long-term, individualized and comprehensive talent cultivation program.
He also explored the cultivation of globalized talent in Shanghai from the perspective of “sharing economy,” as China has already become one of the best-known “sharing economies.”