Taxis and Financial Forums

The ambition of Shanghai to be an in- ternational financial center is known to every people in the world. The discussion about Shanghai’s future as the international financial center is never ceased in recent years and it will become more intense when the government-held Lujiazui Financial Forum comes every year.

However, compared with the internationalization of RMB, open of capital accounts, global financial management and other grand topics, the taxis in the Shanghai Lujiazui Financial Forum from June 28-30 seemed to be more eyecatching.

As the president of China’s Securities Regulatory Commission, Guo Shuqing started his presentation in the Forum with the praising of taxis in Shanghai which are well arranged and never lead passengers to detour. Zhang Lifen, editor in chief of FT Chinese published two microblogs one day before the opening of the Forum to praise that the taxis in Hongqiao Airports followed strict operating orders. These two microblogs were forwarded more than 2,000 times and even Xinmin Evening News, the largest local newspaper in Shanghai, published this with headlines.

But the truth is more dramatic. When two experts praise the well-run and orderly taxis in Shanghai, complaints about the difficulties to call taxi in Lujiazui suddenly came out during the Lujiazui Financial Forum. “Taxi drivers in front of the Shangri-La Hotel (where the Forum was held) collectively refused to use the meter and asked for an extremely unreasonable price”, the microblogs with these contents were forwarded hundreds of times in several hours.

Is the taxi that important? The urban civilization usually consists of numerous tiny but integral parts. A Taiwanese author once wrote that the urban courtesy lied in the distance between men. “In cities with a high population density, one arm’s distance is necessary out of courtesy and it is even the basic individual space”.

Compared with the GDP and the grand mansions, the convenience and quality in catering, accommodation and other factors are the real tools to judge whether a city is suitable for living and business and it is more sincere than the slogan that “xx welcomes you”. If someone finds it difficult to reach his/her destination from the commercial district in a city, he/she will know the importance of taxis. The taxirelated problems are hard to evade in the real life– just like what Guo Shuqing said when his comments about taxis in Shanghai raised the laughter among the audience. “Please do not laugh, credit is the most important thing for the development of financial market”.

In the other words, taxis can be a footnote of a city’s “soft power”. It is a common problem that taxis are hard to be taken in the commercial districts of major cites in China. The well-arranged taxis running in order is attributed to the management of this area. But such a management pattern cannot be spread to the whole city because of the shortages in taxis, drivers, and above all, ideas. Therefore, in this case, there are a lot of jobs to be done for Shanghai and other cities.

Furthermore, the distance from an easy-toget taxi might just be the distance that Shanghai is away from a real international financial city. Money never rests and what maintains its eternal and orderly flow is the rule. Rules can cover everything, from national laws and regulations to the measures of stopping taxi drivers from taking detours and asking for unreasonable charges.

Let’s look back at the modern market-oriented economy, which is mainly based on the swap between strangers. If there are no clear rules, risks will arise. The financial field which is based on credit swap is more dependent on transparent and stable rules since all investors hate uncertainties.

Once for a while, Shanghai was very close to an international financial center. In the 1930s, Shanghai was undoubtedly the financial center in the Far East. The professional attitude and economic reasonability in today’s Shanghai could also be found at that time.

For example, the concessions, which bore mixed emotions of Chinese people, were the first areas in China to touch the modernization of the world. Most of the newspaper publishers and various revolutionary parties are based in these areas. During the wars, millions of people moved into the concessions. As the data about the population density shows, in 1942 the population density in concessions of Shanghai was 70,163 people per square kilometer. At the same time the population density in the independent area of Shanghai was 2,991 people per square kilometer. Though the population density in concessions was higher than the independent area, the management level in these places was much far above the independent areas thanks to the implementation of “rules”.

Now how far is Shanghai away from the international financial center? The idea of building Shanghai into an international financial center that matches China’s economic power and the international role of RMB was put forward in 2009. The goal is to be realized before 2020. Now any newcomers to Lujiazui, where numerous tall buildings are erected, might feel like being in Manhattan, New York or Canary Wharf, London. According to the official data, the total trade volume in the financial market of Shanghai had surpassed 400 trillion yuan by end of 2011 and the number of licensed financial institutions has reached 1,100. The tax income from each official building in the Lujiazui area is said to be over 600 million yuan in 2011.

The Shanghai government believes that tall buildings without the accommodation of big foreign banks and famous economists cannot contribute to the development of an international financial center. Thus it issued numerous measures to recruit high-end financial talents and established foreign financial institutions, such as the subsidies given to foreign financial institutions setting up regional headquarters in Shanghai or apartments that senior financial talents could rent at a low expense.

But the problem is that these measures only target a single group of companies. The city is an integrated organization; commerce is a big in- clusive circle and finance is not isolated from the other industries. A famous banker who directly went to the Shangri-La Hotel after getting off a plane for the Lujiazui Financial Forum, a young server in the hotel leaving his hometown for a better living in Shanghai and a local taxi driver waiting outside with the hope of taking a good guest for the end of his tiresome day. These three people seem to have no relations with each other, but how the former felt about Shanghai might be affected by the latter two’s behaviors and attitudes.

The capital market in Shanghai is usually called the “policy-oriented market”. The construction of a financial center in China is usually guided by policies. The importance of Shanghai for the national financial market determines that innovative and daring financial reform will not initially take place in Shanghai – that’s why the pilot project of free RMB swap, which has been called for long in Shanghai, was initially launched in Qianhai, Shenzhen.

Judged from the history of global financial industry, the birth of a financial center was usually a result of the integration of the market force. For China which is still moving from plan- oriented economy to the market-oriented system, the government’s role in economic development cannot be ignored. But the government effect is a double-edge sword and thus both positive effect and negative influences should receive the same attention. In addition, both investors and local governments need to avoid the “high reliance on the central government”.

When no big turning points are likely to happen to the free swap of RMB, opening of capital projects, and reform to the individual income tax, what will Shanghai do? In some people’s opinions, this does not mean that Shanghai would achieve nothing in the construction of an international financial center. The Global Financial Center Index mainly evaluates a financial center from human resource, commercial environment, market access, infrastructure and general competitive power. From these evaluation conditions, local governments are able to have actions and achievements. It is better for them to create a finance-friendly environment rather than to bet on the uncertain and changeable policies of the central government. The said financefriendly environment covers from orderly market regulation to the well-arranged taxis, which are integral parts of the soft environment of a city.

It is hard to see the rules and their results. That’s why local governments held a vague attitude towards the rules – that is also classified as one of the features of China. But as some experts pointed out, an efficient financial organization is the key to economic growth and an efficient financial organization needs the protection of rules. Without rules, it is hard to establish a society where production is expanded.

Let’s look back at the mess about taxis in Lujiazui. This is a result of the treatment for taxi drivers, supply-demand relations, regulation over the taxi industry and public management. This unhappy behavior is caused by both economic logistics and the shortage in rules.

It is known that the taxi drivers and companies are required not to increase the price of their services during the Lujiazui Financial Forum to avoid making people, especially foreigners, wonder why the taxi service is so expensive in Shanghai. But taxi drivers turned a deaf ear on this because this violated their benefits. The conflicts between taxis and Forum reflect an important question: what can an international financial center bring to ordinary people. This question needs thorough reflection when presently the focus is put on the government, stateowned enterprises and foreign companies.

The city can only be a home to people when it is safe enough and the safety of a city is usually determined by how well the rules are implemented. According to a research held by the U.S. Chamber of Commerce in Shanghai and the Brookings Institution, the financial laws and regulations are the preconditions of a financial center. “It is not enough to have only written laws. Foreseeable and reasonable measures are needed to implement these rules. Not only the commercial laws should be properly carried out, but also key persons working in a company must feel protected by a reasonable legal system. It is necessary to know that the implementation of these laws should not be disturbed by some arbitrary decisions and corruptive factors.”

Furthermore, the targets of these rules are not limited to financial companies and high-end talents. They must be universal, allowing ordinary people to provide better services for economists and bankers and vice versa. Only rules that are applicable for all could form real and efficient systems. If Shanghai could make use of the construction of an international financial system to make some changes to the city itself, the effect is better than building a lot of skyscrapers.