FINANCIAL MUSCLE: Beijing is making tracks to join the ranks of China's other major financial centers  (GU XINRONG)

Standing at the downtown corner of west Beijing's Financial Street, it might be easy to think you were standing on Wall Street in New York City.

A mixture of glistening skyscrapers soars above Beijing's West Second Ring Road and beyond. Stylish hotels and boutiques pack the modern-equipped buildings. Brisk demand for new office buildings even outruns the pace of construction here. Streams of immaculately dressed businessmen shuffle past like an endless river.

Financial Street, the name of Beijing's bustling new showpiece, used to be a place of old alleys and courtyards. Today, it's home to China's top financial regulators, headquarters of domestic financial institutions, more than 500 global financial institutions, and hundreds of thousands of people.

Driven by the recent announcement of Beijing's financial ambitions to the rest of the world, the overnight creation of this economic hub is on its course to reshape the financial map of Beijing, or even the whole country. And what happens here may also make some waves in the international financial waters.

Past and future

The spotlight has again been thrown onto the capital during these high-profile demonstrations of its aspirations to become an internationally influential financial center. The Beijing Municipal Government issued a draft notice on spurring its financial industry and vowed vigorous efforts to become the national financial decision-making center, financial management center and financial information and service center. The draft also stated that much energy would be projected toward promoting Financial Street to a major financial center of Beijing.

This couldn't be more different than its past tight-lipped approach to the financial industry. For a long time, Beijing defined its role as a political and cultural center serving the country. As Shanghai and Shenzhen grew assertive in their financial goals, Beijing cautiously dodged links with the "financial center" tag in case of inviting criticism of "redundant construction."

"Although Beijing never made known its financial ambitions, it has actually risen to become China's financial center, which is a solid ground for its internationalization drive," Li Yang, Director with the Institute of Finance and Banking under the Chinese Academy of Social Sciences (CASS) was quoted as saying by Beijing Youth Daily.

Zhou Chunsheng, a professor at Cheung Kong Graduate School of Business also echoed Li. "As a financial base, Beijing is unparalleled in access to information and pools of professionals, and is knocking on the door to becoming a player in the world's financial game," said Zhou in an interview with Beijing Youth Daily.

Financial gains have heavy weight in Beijing's economy-its financial sector contributed 12.5 percent to its total GDP in 2007, the highest proportion among Chinese cities. The first quarter of 2008 witnessed Beijing's tax revenues from the financial sector balloon a dizzying 88.7 percent over the previous year, topping all industries.

Currently, over 80 percent of China's capital goes through Beijing for checking. Besides this, over 80 percent of China's banks, insurance companies, security companies are headquartered in Beijing, which also accommodates regional branch offices and research organizations of 293 Fortune 500 enterprises.

What matters more is that Beijing is the birthplace of China's financial policies, where the central bank-People's Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission are located.

"With strained land resources and environmental protection pressures, Beijing is not ideal for a labor-intensive manufacturing industry, but is for a high-end service industry. Finance is therefore bound to be a pillar industry of its economy," added Zhou.

However, that does not mean overturning its past function as a political and cultural center. Stronger financing power will render Beijing more able to fuel its tertiary industry, according to Huo Xuewen, Director of Beijing Municipal Financial Service Office.

Beijing or Shanghai?

Beijing's financial commitment has obviously made some other Chinese cities fidgety, especially Shanghai, which has long been geared to join international financial centers.

Some fret that Beijing's rise might blur the prospect of Shanghai becoming an international financial hub and dilute the competence of China as a whole. Others argue that Shanghai will by no means drag its feet on the path of development on the back of a buoyant financial market.

But neither of the two cities seem capable of overshadowing each other in terms of financial prowess. Beijing's financial sector was worth 112.63 billion yuan ($16.1 billion) in 2007, making up 12.5 percent of its GDP, while that of Shanghai totaled 119.57 billion yuan ($17.1 billion), or 10 percent of its GDP. Beijing is currently home to 677 financial institutions, including 234 banks, 59 security institutions and 117 insurance companies, while Shanghai hosts 604, including 109 banks, 94 security institutions and 261 insurance companies.

However, compared with Shanghai, Beijing's financial infrastructure has become a stone around its neck as it battles for a place in the world financial club.

The Shanghai Stock Exchange is the beating heart of Chinese finance, much like the New York Stock Exchange is for the United States. The Shanghai Gold Exchange and Futures Exchange also add importance to its financial market, further sharpening its competitive edge. "In stark contrast, Beijing is handicapped by lack of an influential financial platform despite numerous financial institutions," Qi Bin, Director of the Research Center under the China Securities Regulatory Commission was quoted by the 21st Century Business Herald as saying.

Beijing faces a decade-long gap to catch up with Shanghai due to a weak financial environment," Wang Gongwei, Chairman of the Board at Financial Street Holding Co. Ltd., pointed out.

But Shanghai's development will not come at Beijing's expense. "Shanghai's development can also breathe life into the finance of the whole country, as it can deliver better financial services to financial institutions of other places," Tu Guangshao, Vice Mayor of Shanghai said at the recently concluded Shanghai Lujiazui Forum.

Vice Premier Wang Qishan even projected at the forum that Shanghai's financial blueprint will finally come true as China deepens its financial reform.

No losers in a win-win game

While debates over domestic financial competition rage, some argue that China might need more than one financial center to drive its sprawling inland economy. "Shenzhen and Hong Kong will become the financial powerhouses for south China, and Shanghai drives the development of east China. As China's financial control center, Beijing will extend financial support to northern areas," Niu Fengrui, a researcher with the CASS told the 21st Century Business Herald.

"Each financial center is positioned variably, leaving the possibility for cooperation. And in the aftermath of market economy, competition can optimize the efficiency of resource allocation," added Niu.

As a matter of fact, multiple financial centers within a country are not without precedent. New York, the largest financial center of the United States, leads the world in stock and energy futures while Chicago is recognized as the global financial derivatives trade center.

Beijing has obviously sensed the opportunity it is blessed with. In close interaction with Tianjin, which aims to set up China's first over-the-counter stock exchange, it is lending substance to its pledges. Pilot fund programs will be started to help with small and medium-sized enterprise startups. A private equity fund council will also come into being.

Meanwhile, its three economic pillars-Financial Street, Central Business District and Zhongguancun Science Park-will further grow and add to Beijing's financial strength.

As a latecomer to the financial scramble, Beijing is increasingly unleashing its financial potential by stepping up favorable policies. CITIC Securities told the 21st Century Business Herald that it has decided to relocate its headquarters from Shenzhen back to Beijing. Beside this, some other fund management companies are also reportedly considering moving to Beijing.

Nevertheless, the markets should never be underestimated in creating a financial center. The history of the United States gives an example. Philadelphia was originally the financial center of America, but was gradually replaced by New York.

"It's the markets that call the shots on what will be the financial center, but not the government," Zhou Ziheng, a researcher with the CASS told Beijing Youth Daily.

Zhou also pointed out that China should not rush to precipitate a financial center on immature markets. China's financial security would be staked on its ability to fend off foreign speculators.