Is rivalry among international financial centres – such as that which has traditionally existed between Hong Kong and Singapore – becoming outdated at a time of changing global dynamics in the economic and political spheres as countries develop their own financial capabilities and rely more on domestic rather than offshore financing?
Will the rapid advance of artificial intelligence (AI) into finance mean countries that do not have dedicated financial centres will not need to rely so heavily on imported funds and financial expertise in the future?
This was the situation envisaged by some of the senior financial executives from various parts of the world who attended a two-part financial event in Tokyo last week, organised by FinCity Tokyo and the Tokyo Metropolitan Government to discuss the changing architecture of global finance.
Under this scenario, the strategy of developing a financial centre can no longer be seen in the narrow sense as a means of attracting international funds. Instead, it is part of a broader objective of nurturing domestic capital market development and encouraging a shift from saving to investment in bank-dominated economies such as Asia’s. Financial sector development becomes part of overall economic policy planning in this view.
Traditionally, it has been possible to count the world’s leading financial centres on one hand – New York, London, Hong Kong, Singapore and perhaps one more among various other aspiring candidates. Places such as Tokyo and Frankfurt did not figure highly among the latter group.
But during the Tokyo events last week, representatives of both these cities signed an agreement to accelerate mutual capital market development. The ramifications of this could extend well beyond the realm of finance. Both Japan and Germany are primarily industrial nations that have placed greater importance on developing manufacturing rather than financial skills.