China needs to establish a clearing bank in Shanghai, the country's financial hub, to accelerate the city's pace in growing into a global financial center, a political advisor has proposed.

"Setting up a clearing bank is an important step in building a global financial center inside a country," Ji Xiaohui, a member of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), said on Monday.

The payment and settlement system is usually a basic "platform" in building an international financial center, said Ji, also chairman of Shanghai Pudong Development Bank.

Global financial centers naturally serve as centers for international payment and settlement at the same time, as in the case of New York, London and Hong Kong, he added.

As a city which eyes the status of an international financial center, however, Shanghai has a relatively weak regional payment and settlement system, according to Ji.

China's national payment system is mainly operated from the country's central bank, the People's Bank of China, with a national processing center in Beijing connected to centers in different provinces.

Ji said a Shanghai center needed to be enhanced to make it parallel to the Beijing center, so that the two centers could provide backup copies for each other while payment and settlement can be switched between the two centers in real time.

The main function of the national center could also be moved to Shanghai in the future, to create an independent, market-oriented, and national-level clearing bank, Ji proposed.

He said the government should set up or allow local banks to establish a foreign-currency clearing bank in Shanghai, which could serve as a foundation for possible cross-border transactions.

He also said Shanghai should woo commercial banks to establish settlement centers for their internal needs.

Non-government payment organizations and foreign institutions should also be encouraged to set up settlement banks in Shanghai, he added.

(Xinhua News Agency March 3, 2009)