Jacqueline Loh: Strengthening Shanghai-Singapore cooperation -
anchoring stability and seizing opportunities
Welcome address by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of
Singapore, at the 3rd Singapore-Shanghai Financial Forum, Singapore, 12 April 2017.
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Shanghai Municipal Government, Deputy Secretary General Mr Jin Xingming
Shanghai Municipal Financial Services Office, Director General Dr Zheng Yang
Distinguished Speakers and Guests
Ladies and Gentlemen
Introduction
1 Good morning, and welcome to the 3rd Singapore-Shanghai Financial Forum. It is a great
pleasure to welcome our good friends from Shanghai, as well as our strong representation of
local stakeholders joining us at the forum today.
Uncertainty is the New World Order
2 The second edition of the forum was held in November last year. Since then, global
economic activity has firmed, led by robust consumption in the US and a pickup in China's
underlying growth momentum. The Eurozone and Japan have also registered steady expansions
on account of stronger domestic demand and exports, respectively. Concurrently, the turnaround
in commodity prices last year, followed by an IT upswing in Q4, have improved the prospects for
emerging markets, including the trade-dependent economies here in Asia. A range of indicators
have picked up in tandem with the strengthening of manufacturing and trade in the region, and
forward-looking surveys reaffirm a continued mild improving trend into 2017. Within the region,
domestic demand has generally been resilient and overall growth this year will receive additional
support from the stronger performances of export industries.
3 Yet amid this cautious optimism, we should acknowledge the continued unevenness in the
strength of the expansion across regions in the global economy, as well as the persistence of
policy uncertainties, which will weigh on firms' long-term spending commitments. We are also
confronted with the seeming rise of nationalism and growing populism which can have
unpredictable effects on policies and growth. Against this backdrop, the uncertainty over trade
policies and the future of the multilateral trading system is another area of concern of trading
nations in Asia, as it comes at a time when important underlying structural shifts in global
production and trade arrangements are already taking place.
4 In the financial sector, the advent of FinTech - driven by unprecedented mobility, connectivity
and computing power - possesses the potential to fundamentally change the way intermediation
takes place in the financial sector.
5 Indeed, it seems that continuous shifts and unrelenting changes are the defining
characteristics of the future economic and financial landscape.
Finding Opportunities amidst Uncertainty
6 While some degree of uncertainty is inevitable in this environment, there remain several
broad trends which will unfold and present opportunities which Shanghai and Singapore
institutions can leverage together.
7 First, China's future direction in financial sector deepening and liberalisation is
clear. President Xi Jinping announced at the G20 Summit last year that China would continue
with efforts to make the RMB an international currency and further internationalize China's
financial sector.
8 To support such efforts in Shanghai, Singapore financial institutions can partner the
Shanghai authorities and financial institutions to spearhead policy innovation supporting the
liberalization agenda. For example, DBS participated in underwriting the pilot issuance of free
trade zone (FTZ) bonds by the Shanghai Municipal Government last year, demonstrating how the
complementarity of overseas networks that foreign banks provide can contribute to the
internationalization of China's capital markets.
9 Second, the Belt and Road Initiative (BRI) will remain a priority trans-national initiative in
China. During the National People's Congress meetings last month, President Xi suggested that
the Shanghai FTZ could be a bridgehead for the BRI, to help domestic companies channel
investment overseas and set up a legal framework in line with international trade and investment
rules. As a hub for trade and investment flows in Southeast Asia, Singapore would be a natural
partner to Shanghai in realizing this vision to promote trade and investment flows between China
and the ASEAN region.
1 0 Third, technology will continue to present benefits and opportunities to the financial
sector. As leading FinTech centres, there is great scope for Shanghai and Singapore to harness
technology together in a purposeful way, while ensuring appropriate and responsive regulatory
frameworks to safeguard against possible new risks.
Anchoring Stability, Leveraging Opportunities
11 Shanghai and Singapore can look forward to further strengthening collaboration and
deepening mutual understanding in these as well as other areas. Indeed, Shanghai Pudong
Development Bank (SPDB)'s decision to establish its branch in Singapore - the first for SPDB
outside China - is testament to the bank's confidence in deepening Shanghai-Singapore ties.
12 So how do we leverage the strengthening ties and the positive developmental trajectory to
benefit Shanghai and Singapore as regional financial centres? Allow me to propose some
suggestions, which I hope would lead to further discussion during the forum today.
13 Amidst the current focus on developing China's onshore capital markets to support
capital market liberalization and RMB internationalization, Singapore and Shanghai
financial institutions can work together in developing appropriate risk management and
hedging tools. A wider suite of risk management tools would address the needs of a larger pool
of investors, which would in turn facilitate more investments into China's capital markets.
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To support the Belt and Road Initiative, there is room for Shanghai and Singapore
financial institutions to develop a comprehensive financial architecture to support the
wide range of financial needs related to the initiative.
a. First, both can work together to encourage greater use of capital markets and direct
financing channels. To incentivise the use of bond markets for financing purposes, MAS
introduced the Asian Bond Grant Scheme in Nov 2016, for first-time Asian bond issuers. To
make it more attractive to tap international bond markets, the scheme offsets up to 50% of
issuance costs arising from engaging related legal, arrangement and credit rating services.
Shanghai and Singapore financial institutions can work together to encourage Chinese
corporates to leverage the scheme and access direct financing for their BRI projects overseas.
b. Second, the BRI also presents a good opportunity for promoting sustainable financing,
given the potential negative environmental impact from unsustainable forms of infrastructure
development. China leapfrogged into top position as the largest issuer of green bonds globally in
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2016 . There is much that Singapore can learn from. To encourage green bond issuances, MAS
introduced the Green Bond Grant Scheme in March of this year to offset the costs of external
reviews required for issuing sustainability-oriented bonds. Together, Shanghai and Singapore
can grow the global green bond market and play important roles in furthering sustainable
financing.
c . Third, there is also room for Shanghai and Singapore insurers to provide better
insurance coverage of BRI projects. BRI projects can leverage insurance pools or
consortiums to manage risk exposures of large-scale infrastructure projects. Shanghai and
Singapore insurers can participate in regional insurance pools to provide more comprehensive
coverage for a wider range of risks, while introducing new projects that would enhance the
profitability of these insurance pools.
1 5 In the FinTech space, Shanghai and Singapore can collaborate in creating a
conducive eco-system for FinTech companies and start-ups. The need for collaboration
arises from the fact that technology companies are dynamic and continually looking to
internationalize their businesses. For example, CXA Group, a health technology start-up
established in Singapore, is expanding its services to China and is planning to partner Shanghai
Zhongheng Insurance Brokers for its China expansion. There is scope for collaboration to
enhance our mutual understanding of new business models and assist in negotiating regulatory
hurdles for these companies.
16 One important aspect of enhancing the eco-system is the enrichment of the range of
financing opportunities for FinTech companies. Venture capital (VC) managers are an essential
component of the start-up eco-system, providing capital as well as expertise to start-ups and
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early growth businesses. China already has the largest concentration of VC funding globally .
Singapore also hopes to create a conducive environment for VCs by simplifying the approval
process and regulatory regime for VC managers. At the same time, we hope to expand the range
of funding options to cater to the varied needs of companies at different stages of development.
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Finally, there is also room to deepen information and knowledge exchange between
Shanghai and Singapore industry participants. To this end, MAS and the Shanghai Financial
Services Office are discussing a customised training programme to encourage mutual exchange
between financial sector players. Through such exchanges, industry participants can get a better
understanding of each other's markets and enhance their knowledge of specialized topics.
18 And this marks only the beginning of our long-term relationship. We hope that such
exchanges would pave the way for many opportunities for meaningful collaboration between both
cities, resulting in synergistic outcomes that will elevate both cities through the new financial
world order. Expressing this aspiration in mandarin: 新沪友谊深, 共创新思路.
19 These are some thoughts for everyone to consider. I am sure our strong panel of speakers
will provide even greater insights during the discussions later. I wish you a fruitful day ahead at
the forum.