(Yicai Global) Dec. 12 -- Shanghai should expand the scope of its markets and portfolio of investment products to include more financial derivatives so as to leverage the metropolis’ strengths as an aggregator of factor markets and to boost its global competitiveness, an official at the interbank trading and foreign exchange division of China’s central bank said.

The transformation of Shanghai into an international financial hub calls for a complete transition towards institutional opening-up, which means the city should not only stick to the high-level opening-up of its markets to the outside world, but also focus on promoting interconnectivity between factor markets, said Huo Yingli, secretary of the Party Committee of the China Foreign Exchange Trade System.

In July, the Hong Kong Bond Connect scheme with the mainland’s stock markets, including the Shanghai bourse, opened, allowing cross-border bond subscriptions by overseas investors. In future, such connectivity will expand towards the derivatives market, she said.

Shanghai should keep improving the connectivity and partnership between its financial market and financial infrastructure, to facilitate the link between the inter-bank bond market and the stock exchange bond market, so as to generate unblocked flows of market factors and resources, Huo said at the fourth Bund Summit last week.

China’s inter-bank and stock exchange bond markets are quite distinct. The inter-bank bond market is more like a wholesale market that reflects the function of the short-term money market. The current average daily turnover of yuan-denominated bonds on the inter-bank market is more than CNY7 trillion (USD1 trillion). Of this, repurchases make up 75 percent. Coupon rates are higher in the inter-bank market.

While on the bourses, companies which issue bonds can get closer to listed firms and have a high liquidity of corporate credit bonds.

The use of Big Data, cloud computing, artificial intelligence and other cutting-edge tech is reshaping the structure and trading mechanisms of the financial markets and this has also generated more demand and services, Huo said. In-depth technological innovation should be promoted to boost growth and to safeguard the efficient and secure operations of the financial markets.

Editors：Shi Yi, Kim Taylor