Editor's note: In order to systematically study the financial cooperation practice of the BRI, promote experience exchanges and business cooperation in the financial sector, and better introduce the excellent cases of financial cooperation, Asian Financial Cooperation Association (AFCA), on the basis of Belt and Road Financial Cooperation Committee (BRFCC), conducts Asian Financial Cooperation Association Belt and Road Financial Cooperation Practice Report. The appendix of the report selects 40 Belt and Road Financial Cooperation Practice Cases, including credit support, equity financing, bond issuance, insurance services, payment and settlement, risk management, inclusive finance, investment and financing platform, and epidemic prevention and control. The rich cases not only show the business achievements of AFCA members and relevant institutions under the BRI framework in recent years, but also reflect the new changes of the BRI financial cooperation practice.
CEIS: Xinhua • International Financial Centers Development Index (IFCD Index)
Abstract: Xinhua • International Financial Centers Development Index (IFCD Index for short), the former Xinhua • Dow Jones International Financial Centers Development Index, was launched to the world in 2010, which fills the blank of indexation of the financial centers in the Asia-Pacific region, showing China Economic Information Service (CEIS)’s active engagement and construction of financial information service systems for the countries along the Belt and Road, and being in line with the demand of Belt and Road countries for financial centers and financial information services.
From five perspectives namely financial market development, growth and development, industrial support, service level and general environment, the IFCD Index comprehensively evaluates the cities around the world qualified as international financial centers to present general strength of these financial centers within a given period. Sofar the annual index has been released for ten years in a row.
1
Background and Financial Demands Analysis
i. IFCD Index fills in the blank of financial centers index in the Asia-Pacific region
The IFCD Index comprehensively evaluates the cities around the world qualified as international financial centers, creates systematic, all-round and distinctive assessment setup, performs quantitative assessment by indexation methodology and thus accurately shows the general strength of international financial centers in a given period. The index has positive influence upon the research orientation of the Global Financial Centers Index (GFCI) published by the City of London, filling in the blank of financial centers index in the Asia-Pacific region, while reflecting the desire of the developing countries for restructuring global financial governance.
ii. Demand of countries along the Belt and Road for building financial centers and financial information index services
Guided by the new perception of financial centers and supported by the innovative financial centers ecology, the IFCD Index invents the “circle-core-pivot ecology response model”, showing diversified development strategies and concepts of variant financial centers, while measuring the comprehensive strength of global financial centers, to provide worldwide investors with a significant benchmark for understanding the regional financial markets objectively especially in areas of financial market, growth and development, industrial support, service level as well as general environment in the countries along the Belt and Road.
After release of the index, Seoul Metropolitan Government, the British Consulate-General in Shanghai as well as other domestic and international institutions and organizations sent congratulatory messages on the successful launch of Xinhua • Dow Jones International Financial Centers Development Index. The Administration of the President of the Russian Federation and Moscow City Government invited CEIS index team to give guidance on constructing Moscow international financial center. All these show the importance of foreign governments attached to the index.
2
Measures and Highlights
i. Index design principle
Guided by the innovative ecology concept of financial centers, the “circle-core-pivot ecology response model” is established as the structure for the IFCD Index. This means that international financial centers should form the ecological circulation system that takes “growth and development” of serving real economy and realizing industrial support as the “core”, takes “financial market”, “service level” and “industrial support” as the “pivots” and takes “general environment” as the environment circle.
Among them the first-level indices reveal the development regularity of ecology systems of financial centers on five dimensions namely financial market, growth and development, industrial support, service level and general environment. “Financial market” measures the core development strength of international financial centers; “growth and development” measures the sustainable drive of development of international financial centers; “industrial support” measures their material basis; “service level” measures the supporting capabilities; “general environment” measures the external environment. The secondary indices are the hierarchical extension of functions and attributes in line with the first-level indices while the tertiary indices are the specific indicators.
ii. Establishment of experts panel for IFCD Index
In the process of index compilation and maintenance, the project team makes full use of expert resources to make the index design more scientific and authoritative. The experts panel has been pooled with extensive engagement of well-known scholars and experts from universities and professional research institutes such as Peking University, Renmin University of China, Industrial and Commercial Bank of China, International Finance Research Institute of Bank of China, Research Institute of China Minsheng Bank.
The expert panel is responsible for deliberating the plan of index design, conducting whole-process consultation and authoritative augmentation of index compilation, reviewing the compilation scheme to guarantee the scientific configuration of index system, making professional illustration of each issue in light of the latest international financial studies and market trends, and offering scientific and reasonable advice on the matters of index operation, maintenance and adjustment, etc.
iii. Authoritative and stable data collection system
All data of the IFCD Index is sourced from the international authoritative third parties, which are stable, reliable, transparent and trustworthy.
1. The data of objective indices under the IFCD index are extracted via channels as below:
(1) Data published by international authoritative organizations e.g. reports of World Bank, World Economic Forum, International Monetary Fund;
(2) Data published by world-renowned companies, stock exchanges and trustworthy websites;
(3) Data from CEIS’s global data collection system;
(4) Data published by famous research institutions.
2. For the subjective survey data, the CEIS’s global data collection system is utilized to fully consider the different views on the assessment and importance of factors of the respondents in different sectors and regions. Based on the valid samples in the recovered questionnaires, the survey credibility and validity are carefully studied and analyzed to make the findings more rigorous and scientific.
The CEIS’s global data collection system is utilized to fully consider the different views on the assessment and importance of factors of the respondents in different sectors and regions. Based on the valid samples in the recovered questionnaires, the survey credibility and validity are carefully studied and analyzed.
CEIS’s global data collection system is utilized to probe into such contents as below:
(1) The subjective scoring of 45 sample cities in the five aspects i.e. financial market, growth and development, industrial support, service level and general environment;
(2) The subjective assessment of the importance of these five aspects i.e. financial market, growth and development, industrial support, service level and general environment;
(3) In-depth investigation of the process of Renminbi internationalization.
iv. Screening of samples
Basic sampling principles of the IFCD Index: both the data criteria on financial elements clustering of international financial centers and the professional comments of expert panel are taken into account with the combination of quantitative and qualitative analyses.
The international financial centers generally have such characteristics as clustering a certain number of financial organizations engaged in international businesses e.g. international banks, securities companies, insurance companies and fund dealers, while enjoying a well-established international financial market system including stock market, bond market, interbank lending market, gold market and foreign exchange market. The international financial centers are usually carried by modern cities with availability of developed communication network and transport conditions, well-proven service industry, high opening-up level, etc. The specific sample data are selected as per the principles below:
Scale refers to the sequencing of financial transaction scales of stock, bond, foreign exchange, etc.
Growth refers to the sequencing of financial market growth pace of stock, bond, foreign exchange, etc.
Balance refers to the balance of geographic locations of sample cities.
3
Achievements and Impacts
i. Social attention
Since its release, the IFCD Index has received extensive attention and recognition of government agencies, industrial associations, universities, research institutes, media and other financial organizations with consolidating presence and influence. The news release of International Financial Centers Maintain a Stable Layout and Show a Trend of Multi-Polarity Development by Xinhua News Agency has gained a cumulative reading number of over 1 million times for that single article.
In the meantime, global media including Reuters, Bloomberg, Dow Jones, Wall Street Journal, Jiji and NHK all take it as a significant event of international financial market in their reports. Seoul Metropolitan Government, tthe British Consulate-General in Shanghai and other domestic and international institutions and organizations sent congratulatory messages on the successful publication of Xinhua • Dow Jones International Financial Centers Development Index. The Administration of the President of the Russian Federation and Moscow City Government invited CEIS index team to give guidance on the building of Moscow international financial center.
ii. Social impact
1. Filling the blank of indexation research on the international financial centers in the Asia-Pacific region, and offering a reference to the building of international financial centers in Asia.
The index has positive influence upon the research orientation of the Global Financial Centers Index (GFCI) compiled by Z/YEN Group of the City of London, fills in the blank of financial centers index in the Asia-Pacific region, and reflected the desire of the developing countries for restructuring the global financial governance.
2. Active engagement in joint construction of the financial information service systems for the countries along the Belt and Road
The IFCD Index is the general assessment of worldwide cities that meet certain qualifications of international financial centers, including the centers located in the countries along the Belt and Road. Through systematic, all-round and distinctive assessment plus quantitative measurement of sub-indices, the index accurately shows the comprehensive strength of international financial centers within a given period. It provides financial information service to the market players devoted to the construction of Belt and Road and adds diversity to the financial information service systems in the countries along the Belt and Road.
3. Serving the construction of international financial centers in the Belt and Road countries and guiding the development orientation and global positioning by index information
Since its official release, the IFCD Index depicts the development history of 45 sample cities of international financial centers including those in the countries along the Belt and Road. The construction achievements of international financial centers along the Belt and Road are quantified by the index, thus offering a measurement for their development orientation and global positioning.
4
Obstacles, Advantages and Policy Suggestions
i. Obstacles
1. Technical development and maintenance
The survey data collection system – CEIS’s global data collection system requires high competency of technical development and maintenance of a well-established technical development and maintenance team and internal management system in a bid to guarantee the smooth creation of index system.
2. Data collection and maintenance
All the data of IFCD Index are extracted from the international authoritative third-party sources such as World Bank, World Economic Forum, International Monetary Fund, famous companies and stock exchanges, which are highly reliable and trustworthy. However, in a few cases the data are not timely updated and hard to acquire.
ii. Advantages
1. Professional R&D, operation and maintenance team
The professional team of Xinhua Indices is in charge of the R&D and maintenance of IFCD index to guarantee its operational sustainability. Meanwhile the team plans and creates the relevant procedures like system, data monitoring, emergency backup, operation and maintenance management.
More than 25 percent of the Xinhua Indices R&D and maintenance team members have PhD degree and over 90 percent have master’s degree or above in finance, mathematics, statistics, quantitative economics and financial engineering. The team makes use of technologies of big data, neural network, clustering analysis, etc. in data mining and statistical analysis and gains abundant experience in quantitative index analysis to grasp the industrial trend in a real-time manner.
2. Market survey
The project team works with regulatory bodies, research institutions, universities, financial institutions, etc. to conduct in-depth interviews and surveys on global financial market, international financial centers in Asia, policy orientations, among others, and prudently deliberate the feasibility of index design, perfect index functionalities and promote the index for market-oriented benchmarking and application.
3. Scientific process of index compilation
The IFCD index is in strict compliance with the index compilation procedures including:
(1) Integrated industry-academy-research R&D through organizing the surveys by expert team, summarizing the development regularities and highlights, and generalizing the opinions of experts.
(2) Design of index system is conducted through profound research, developing and creating the system of index product, and organizing the review by expert panel to guarantee the scientific configurations of index system.
(3) Data processing and information collecting is carried out through utilizing the public data of authoritative organizations, and clarifying the durations, measurement units and meanings of indicators to ensure the authenticity, objectivity and rationality of assessment results.
(4) Data organizing and preprocessing is done through rounds of expert assessment and multi-dimension data comparison and monitoring, guaranteeing the acquisition of the most representative data, and realizing the synchronous standardization process on the basis of dimensional parameter methodology.
(5) Establishment of index model is realized after prophase theoretical research and expert survey, establishing the index calculation model and signaling model, and simulating to test the results of index operation.
iii. Policy suggestions
With respect to the latest index results and the global financial market trends, the international financial centers show the multi-polarity tendency together with the coexistence of both leading cities and emerging competitive cities. The financial centers located in the emerging economies present stronger momentum that the Asian financial centers represented by Shanghai are gaining an increasingly important position in the world financial system. The American and European economic powerhouses need to form the collaborative situation with the economic patterns of other countries for win-win effect where the huge gaps of financial and capital markets should be adjusted and narrowed. In addition, inclusive finance targets at fairness and efficiency has become an integral part of the world financial system that helps support global industrial innovation, and create the international market environment and economic structure of fair competition.
