Ask five people to name the three most important financial centers in the world and you will probably get five different answers. Most will likely have New York, London, and Hong Kong on their list? Others may include Hong Kong, Tokyo, or Singapore.

What if this question was asked in 2007? Now it is 2011 and we are about 3 years removed from the early stages of the Global Financial Crisis. New York and London are still suffering from the fallout after being the undeniable world financial leaders for the past century. Hong Kong and Singapore are growing again after some pain from the crisis. Tokyo used to be a sure entrant in this list, but has been having financial issues during most of the last 20 years. Singapore does very well and ranks #1 for ease of doing business, but is held back by being a small city/state that depends on immigrants to fill all of its export dependant jobs.

That leaves Hong Kong, the former British colony that is now part of China. It ranks at #2 for ease of doing business, allows international listings on its stock exchange, currently has more luxury brand IPOs than New York, and borders China (the 2nd largest economy in the world). All of this leads to a sense that money is flowing in to the region via Hong Kong. So, the top three world financial centers may be New York, London, and Hong Kong. That covers North America, Europe, and Asia well as well as the three largest economic areas (European Union, United States, and China). Are New York and London still the top two? Could Hong Kong or another city supplant them?



China wants to make Shanghai a world financial center. Can it be done? Since economic reforms in China started really taking off 20 years ago, China has rocketed onto the world stage and accomplished many impressive feats including hosting of the 2008 Summer Olympics and 2010 World Expo. Hong Kong has been part of China for nearly 15 years, but still operates as it did under Britain. China has a model in Hong Kong to look at for Shanghai, but Shanghai and China (#79) are far from being as open as Hong Kong (#2). However, I would never count current China from accomplishing something it wants.

This is a good time for up and coming financial centers to challenge the dominance of New York and London. They are both badly bruised for trading in financial products that led to the Global Financial Crisis. Will Shanghai join the top three or make it the top four? I think Shanghai’s emergence would come at the expense of New York and London. Instead of two clear dominating financial centers in New York and London, we could have four equally important world financial centers with two being in Asia. That would be quite a coup for China, if it can move Shanghai from being China’s financial capital to a world financial capital while also keeping Hong Kong up there as well.

M.F.




Data/Information Links:
Shanghai - World Financial Center?
http://business.globaltimes.cn/china-economy/2011-01/613118.html
Hong Kong - Luxury Brand IPOs
http://www.businessweek.com/magazine/content/11_23/b4231046042769.htm
Ease of Doing Business
http://www.doingbusiness.org/rankings