Financial Hubs See an Opening Up at the Top
Wednesday, October 1, 2008
SHANGHAI -- Looking down from his building's 87th floor at the glittering signs of multinational banks along the river here, Fan Dizhao declared confidently that Wall Street's reign as the world's No. 1 financial hub is coming to an end.
The United States may be grappling with its worst economic crisis since the Great Depression, but these are go-go days in China.
Venture capital, private equity and foreign direct investment are at all-time highs. Although Shanghai's stock exchange has lost close to two-thirds of its value this year, China's big banks have escaped the credit catastrophe largely unscathed, and the economy continues to expand briskly.
Fan, an investment manager at Guotai Asset Management, which oversees funds valued at about $5.1 billion, said that despite the country's inexperience in the financial sector, China has a rare trump card: mountains of cash.
"It is inevitable," he said, "that we will take the U.S.'s place as the world leader."
But Shanghai is just one of several cities harboring ambitious -- and to some analysts, fanciful -- aspirations while the global finance industry is reshuffled.
Tokyo has lifted some regulations on banks and insurance groups and has begun to do something it resisted for a long time: print securities documents in English. The Singapore government, which through its massive sovereign wealth funds has increased its private equity and other financial holdings in recent years, has said it is looking to invest in more distressed assets in the United States.
And Dubai, riding the Middle East's oil-fired boom, has declared itself the center of Islamic finance and says it aims, in the words of Dubai's government, to "develop the same stature as New York."
With U.S. investment houses tumbling into bankruptcy, consolidating operations or transforming themselves into more closely regulated commercial banks, Wall Street's reputation as the prime address to raise capital, seek investment advice or trade securities is no longer rock-solid.
The flow of capital had already begun moving away from the United States this summer. A survey released last week about the competitiveness of world financial centers found that New York and London, often neck-and-neck in such rankings, were still at the top.
But the survey also found that the two cities' lead over their rivals shrank after February because of the credit crisis and the collapse of U.S. securities firms. Frankfurt, Germany, and Paris also lost ground. Cities in Asia and the Middle East, meanwhile, were deemed most likely to gain in importance.
"Dubai, Singapore, Shanghai and Mumbai -- they are the probable leaders," said Michael Mainelli, executive chairman of Z/Yen group, which carried out the survey. Researchers looked at factors including infrastructure, foreign direct investment, cost of living and the presence of a fair and just business environment.