(Yicai) Dec. 31 -- Shanghai has progressively opened its financial market in areas such as foreign exchange, gold, and futures over the past two decades since China adopted a managed floating exchange rate system, strengthening its connection and collaboration with global markets, according to the head of financial markets at Standard Chartered China.

"I have been fortunate to fully experience the reform and opening-up of China's financial industry over the past 20 years, including the foundational phase in the first decade and the comprehensive opening-up phase in the second decade," Wesley Yang told Yicai in a recent interview.

In the first decade after 2005, China gradually introduced various forex products. During that time, reforms and innovations in interest rate liberalization were also steadily advanced, including the implementation of a bilateral quotation system for the Chinese yuan's exchange rate and the establishment of the central bank's interest rate corridor mechanism, said Yang.

Yang, a former trader, recalled the rapid upgrading of Shanghai's financial infrastructure, including the establishment of key institutions such as the China Foreign Exchange Trade System and the Shanghai Gold Exchange, which have laid a solid foundation for connectivity with global markets.

Additionally, Shanghai has established deep collaborative relationships with the Hong Kong market and global markets by building trading platforms, coordinating system integration, and implementing legal regulations and market access mechanisms, playing the role of a core executor and facilitator, he added.

Yang cited an example, noting that since its establishment in 2009, the Shanghai Clearing House has introduced the central counterparty system, which has reduced trading credit risks, expanded trading volumes, promoted financial product innovation, and provided support for the stable development of financial markets.

After 2016, the opening-up deepened, and Shanghai gradually transformed from a testing ground for product innovation into a connectivity hub between domestic and international financial markets, Yang stated.

Yang said that the introduction of the China Interbank Bond Market Direct scheme in 2016 marked the beginning of opening up the bond market, followed by a series of new connectivity measures. Subsequently, China's bond market was included in the three major international indexes, accelerating the inflow of foreign capital.

As of October 2023, a total of 1,110 overseas institutions had entered China's bond market. By last August, foreign investors collectively held around CNY4.6 trillion (USD630.3 billion) in Chinese bonds, accounting for 2.7 percent of the total, up from 2.4 percent in December 2023, according to public data.

Financial innovation has provided more business expansion opportunities for foreign-funded institutions in China. For example, Standard Chartered Bank, one of the first foreign participants in the treasury futures market and the Shanghai Gold Exchange's gold market, has been deeply involved in local markets for foreign exchange, interest rates, bonds, credit derivatives, and commodities, contributing to market liquidity, policy recommendations, and product innovation.

Yang said that the London-headquartered bank has leveraged its international network this year to participate in over 20 issuances of panda bonds, renminbi-denominated notes offered by foreign borrowers in China. The clients include foreign governmental institutions, international development organizations, and overseas enterprises. Notably, Standard Chartered played a key role as an underwriter for the National Bank of Canada's landmark issuance of a CNY5 billion (USD685 million) panda bond, setting a record as the largest panda bond issuance by a foreign bank in China.

Editors: Tang Shihua, Emmi Laine