Shanghai pulled up its socks in the latest Global Financial Centres Index, climbing eight spots, to 16th. The ranking, published by London-based consulting firm Z/Yen Group, coincided with September’s launch of a Shanghai free-trade zone that will offer wider opportunities to foreign investors. More growth should follow, given China’s goal of making the city an international financial center by 2020 and its recent pledge to give markets a bigger economic role. Yet Shanghai poses little immediate threat to Hong Kong, which stayed at No. 3, behind New York and London.

“For at least the next three or four decades, it will be difficult for Shanghai to overtake Hong Kong as the main financial center for the Greater China region,” says Zhiwu Chen, a professor of finance at the Yale School of Management. Hong Kong has three major advantages, Chen explains: transparency and a free flow of information, an independent judiciary and a large foreign business population that prefers it to Shanghai.

China’s economy is big enough for two global financial centers, says Helena Huang, a London-based researcher with think tank Chatham House. But Huang too predicts a slow rise for Shanghai. Where Hong Kong has its own monetary authority and currency, its mainland rival must follow the central government’s cautious reform agenda, she notes: “Beijing is the elephant in the room.” • •

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