1. Major achievements in Shanghai’s journey to becoming a leading international financial center 
Amid profound shifts in the global economic landscape, the development of an international financial center is a key marker of national competitiveness and a strategic pivot for supporting the new development paradigm. As China’s gateway to reform and opening-up, Shanghai has been entrusted with the historic mission of establishing itself as a premier hub for global resource allocation. In recent years, the city has made significant strides in advancing its role as an international financial center.
First, the core functions of the markets continue to strengthen. In 2024, the Shanghai Stock Exchange ranked third globally in market capitalization, while the total market value of bonds under custody ranked first among global exchange-based bond markets. The Shanghai Gold Exchange led the world in on-site spot gold trading volume, and multiple commodities on the Shanghai Futures Exchange ranked first globally in trading volume. Overall, Shanghai’s financial markets have seen annual transaction value exceed 2,800 trillion yuan.
Second, market openness continues to expand. The city’s role as a hub for RMB internationalization has been further cemented, with cross-border RMB settlement seeing significant growth in 2024. Offshore trade in the Lin-gang Special Area has surged by 50% year on year, with over 500 new enterprises added to the international trade “white list.” These advancements have propelled Shanghai into the ranks of the world’s top five offshore financial centers for the first time.
Third, the financial market ecosystem continues to improve. A suite of new policies, including the Shanghai Action Plan for Further Enhancing the Business Environment (2024) and Measures for Deepening Financial Opening-up and Innovation in the China (Shanghai) Pilot Free Trade Zone and Lin-gang Special Area, have been introduced. These initiatives aim to streamline market access, enhance financial services, facilitate cross-border transactions, and strengthen digital oversight.
2. Cross-border and offshore finance: twin engines for Shanghai’s financial internationalization
The synergy between cross-border and offshore finance has not only positioned Shanghai as a global hub for capital flows but also as a testing ground for integrating international financial regulations.
First, cross-border finance facilitates “dual circulation” and removes barriers to capital flows. The “Free Trade Zone Cross-Border Cash Pooling 3.0” was launched, driving a significant increase in settlement value for free trade accounts across more than 200 economies worldwide. The number of pilot enterprises with the cash pooling program integrating domestic and foreign currency management has reached 800, enabling multinational corporations to reduce cross-border financing costs by 15%. Mutual recognition of eligible listed companies between the Science and Technology Innovation Board and Hong Kong Stock Connect has been achieved, bolstering cross-border fundraising for “hard tech” companies. The expansion of Southbound Bond Connect now allows overseas retail investors to participate, further broadening RMB repatriation channels. Meanwhile, the RMB Cross-Border Interbank Payment System (CIPS) has expanded its reach to over 120 countries and regions, providing efficient financial support for economic and trade cooperation under the Belt and Road Initiative. Additionally, Shanghai is integrating blockchain and AI technologies to develop a cross-border capital flow monitoring and early-warning platform.
Second, offshore finance creates an “open magnetic field” that enhances global resource allocation capabilities. The Lin-gang Special Area introduced the country’s first offshore RMB tax guidelines and piloted offshore trade tax incentives. The value of the offshore RMB bond market has surpassed 600 billion yuan. An international reinsurance trading platform was established, positioning Shanghai as a hub for the dispersion of Asian catastrophe risks. The Shanghai Clearing House launched a cross-border RMB clearing connect for bulk commodities, covering sectors such as iron ore and crude oil, while promoting the “Shanghai Benchmark” to align with international bulk pricing systems. RMB-denominated “Belt and Road” infrastructure real estate investment trusts (REITs) were introduced, attracting participation from the Silk Road Fund and Middle Eastern sovereign wealth funds via the qualified foreign limited partner (QFLP) system, thereby establishing a cross-border asset securitization hub.
3.Promote high-quality development of cross-border and offshore finance
Looking ahead, Shanghai will actively play its role as a vanguard of reform and opening up and a pioneer of innovative development, by expanding the pilot programs for institutional innovation in cross-border and offshore finance. The city will continue to progress toward becoming a global financial center and add even greater “Chinese momentum” to the world economy.
First, the city shall leverage institutional innovation in shaping a new frontier of policy openness. Financial reforms in the Free Trade Zone will be deepened, and the pilot program for integrated domestic and foreign currency cash pooling will be expanded. The cross-border capital flow management model will be optimized, and a mechanism combining the negative list with prudent supervision will be explored in the Lin-gang Special Area. Efforts will also focus on pioneering new approaches to the offshore financial tax system and strengthening the offshore corporate income tax preferential framework.
Second, the city shall bolster market interconnection and interoperability to build a global capital hub. The development of innovative tools, such as “Belt and Road” bonds and green financial derivatives, will be accelerated. The “Shanghai-London Stock Connect” will be expanded to emerging markets in Central Asia and the Middle East. Support will be given to the interconnection of the Shanghai Clearing House with overseas infrastructure, while building a cross-border financial asset trading platform.
Third, the city shall tap into digital technology empowerment to strengthen the risk prevention and control framework. Blockchain technology will be leveraged to enhance the oversight of cross-border funds as the city continues to refine the “digital regulatory sandbox.” The intelligent risk control system for anti-money laundering and anti-fraud will be optimized, and a diversified dispute resolution mechanism for international financial disputes will be established to maintain a rule-of-law business environment in the offshore market.
The author is Wu You, an assistant researcher at the Institute of Economics, Shanghai Academy of Social Sciences.