When HSBC lists on the Shanghai exchange, it will give the city a huge boost in its long-running battle with Hong Kong to become China’s leading financial center.
Many multinationals already have quotes in Hong Kong, which has evolved as a global financial hub since the British took over after the opium wars of the 1840s.
Hong Kong’s economy is rooted in capitalism and characterized by low taxation, free trade and minimum government intervention. The Hong Kong dollar is the ninth most traded currency in the world.
Shanghai is struggling to catch up. Chinese companies that wanted access to a deeper and more stable market have tended to drift to the more established former British colony, where broking firms, lawyers and accountants have congregated for decades.
For all Shanghai’s glamour, glitz and easygoing cosmopolitanism, the city’s stock exchange has acquired a poor reputation.
Its listed companies have been the target of a wave of speculative buying by retail investors who have piled into property and other assets, much to the horror of the authorities.
Although Shanghai was beginning to attract some major Chinese companies prior to the credit crunch, the market has crashed in the past two years and has lost much of its luster.