Shanghai will be built into a major international financial center and shipping hub by 2020, the State Council said, an indication of China's intention to place greater reliance on the city as it refines its strategy for battling the global economic downturn.

Shanghai will create "a multi-layered financial market system, promote the opening of financial services and ensure financial stability in the coming years to achieve this goal," the Cabinet said in guidelines listed on the central government's Website.

"Shanghai's economy and social development have made great achievements during the past 30 years of opening-up. Now it has come to a key transition point," the Cabinet said.

"Accelerating Shanghai's development in modern services, manufacturing, financing and shipping will be of great significance to the Yangtze River Delta and the whole nation," it said.

Premier Wen Jiabao presided over Wednesday's meeting granting Shanghai more state-level support to develop into a global financial powerhouse that draws on the strength of the Chinese economy and the growing importance of the national currency.

"Amid the ongoing financial crisis, this decision is most encouraging and gives us great confidence," Richard Yorke, president and chief executive officer of HSBC Bank (China) Co, said on Wednesday.

"The current crisis will cause an acceleration in the shift of capital markets from the West to the East. Against this backdrop, Shanghai as an international financial center will play a key role in the long-term economic growth of China and the world," he said.

Zheng Xin, president of the Shanghai branch of the Agricultural Bank of China, said the timing of the guidelines shows the central government is moving firmly ahead on reform and globalization.

"It also means more room for the financial institutions in Shanghai, including players like us," Zheng said.

Established financial centers such as New York and London have been hit hard by the worst financial crisis since the Great Depression, and emerging markets like Shanghai now have a chance to catch up with the competition. China is a rare major economy that is still expanding while other major powers are in recession.

The Cabinet announcement was light on details. But sources said the guidelines may encompass features such as allowing Shanghai to begin trial operations on using the yuan for international trade settlement, encouraging private equity and developing a re-insurance market.

The state guidelines give Shanghai general goals to move toward, and detailed policy will be implemented by the city government.

Shanghai is already China's financial hub, home to the country's largest stock market, its major futures market for metals and energy, its gold bourse and foreign exchange center.

Looking ahead, Lam Chi Man, executive vice president of the Bank of East Asia (China), said Shanghai needs to improve its accounting, legal services and rating services as part of the efforts to move forward as a global leader in the financial industry.

On the shipping front, the premier urged an integration of port resources within the Yangtze River Delta, with Shanghai as the hub.

(Shanghai Daily March 26, 2009)