Download SWOT Analysis for Wuhan to Establish the Finance Center of

SWOT Analysis for Wuhan to Establish the Finance Center of
China’s Central Region
LI Min, WANG Renxian
School of Economics, Wuhan University of Technology, P.R. China, 430070
[email protected]
Abstract: This paper utilizes the SWOT analysis, a usable method, to analyze the feasibility and
difficulty for Wuhan to establish regional financial center. With the comparison with capital cities of
other five provinces in central region, this paper outlines the strengths of establishment of regional
financial center in Wuhan; with the comparison with major domestic financial centers, we clarify the
weaknesses of Wuhan to establish regional financial center. And then we point out the opportunities are
very valuable, at the same time, the threats is very pressing. What we have done above all is aiming at
giving more effective suggestions for the finance development and economic development in Wuhan.
Keywords: Central, SWOT analysis, Regional financial center, Wuhan
1 Introduction
In the end of 2007, "Wuhan 1+8" city circle was confirmed as one of reform pilots of "national
resource-saving and environment-friendly society ( 'the two types of society') by the State Council, the
position of Wuhan in central China and the regional economic coordination development strategies has
been pushed to the historical height.
Financial center provides streams of a powerful driving force for regional economic development.
When the concept of the financial center sets off huge turmoil in China, the competition for financial
center, in effect, becomes the competition of the regional economic development.
The establishment of a regional financial center in Wuhan is the hot spots in the academic study in
recent years, scholars discuss this issue from all perspectives, and a lot of proposals and ideas have been
accepted by the government. However, possibility and breakthrough points of construction of the
regional financial center in Wuhan have relatively large-scale research space. This paper is based on the
SWOT analysis and through realistic comparison, it highlights the provincial strengths of Wuhan in the
central capital cities, clarifies the weaknesses of Wuhan, and then points out opportunities and threats
for Wuhan to establish central regional financial center.
2 Strengths of Wuhan to Establish Central Regional Finance Center
As the central provincial capital cities, Wuhan, Changsha, Nanchang, Zhengzhou, Taiyuan and
Hefei represent respectively the highest competitive level within their provinces and they all hope to be
a regional financial center. Next, we will outline the strengths of Wuhan to establish the Central regional
financial center compared with the central capital cities
2.1 Advantages of the total economy
According to the market-oriented strategy and industrial and economic restructuring planning of
the national economy, Wuhan has achieved economic restructuring, industrial restructuring, market
rules and resource advantages integration since the reform and opening up. Comparison with the other
five capital cities in the central part, Wuhan is in the first, including the economic indicators GDP, per
capita GDP, fixed asset investment and total retail sales of social consumer goods, etc (Tab. 1).
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Tab. 1 Some Economic Indicators of Six Capital Cities in Central in 2006.
Cities
Wuhan
Zhengzhou
Changsha
Nanchang
Taiyuan
Hefei
GDP(hundred millions yuan)
2590
2001.5
1790.66
1184.57
1013.38
1073.86
per capita GDP(yuan)
31630
27798
27853
26145
29497
23205
FAI(hundred millions yuan)
TRSSCG(hundred millions yuan)
1325.29
1293.33
1031.9
822.2
1089.81
865.61
641.64
358.4
501.13
436.47
824.8
384.31
(Data: the data of Tab.1 come from the "Statistical Yearbook of Wuhan -2006" and related urban 2006 national
economic and social development statistical data. per capita GDP index of Wuhan in the table is based on the
relevant data, calculation formula is: GDP / the total population. The per capita GDP of other cities data comes
directly from the statistical bulletin.)
2.2Outstanding R&D capabilities and reserve personnel
(1) Scientific and technological support powerful
Along with the growth of the total economy, the economic structure of Wuhan has also constantly
optimized and the quality of the economy has increased. In recent years, high-tech industries of Wuhan
have rapidly developed, and Wuhan formed a dynamic new economic growth zone. Wuhan has 105
units of the scientific research institutions with a representative of Branch of the Chinese Academy of
Sciences, a national laboratory (only seven in the nation), 13 key national laboratories, 13 National
Engineering Research Centers, 11 national level enterprise technical centers, 40 municipal science and
technology business incubators, 17 Productivity Center, 14 industrialization of science and technology
base. The first one photonics Information Industry Base (Optics Valley) lies in Wuhan, the first
incubator building pilot city is Wuhan.
(2) A stronger personnel reserve than other cities’
Strong educational force of Wuhan supports the building of regional financial center. There are a
number of first-rate universities in Wuhan. At the end of 2006, the number of universities reached
52.Wuhan has 49 academicians, 747,200 students in school (first in the nation). Major famous
universities in Wuhan continuously provide the financial professionals and composite talents. Abundant
human resources in Wuhan have been the strong talent reserves for regional financial center (Fig. 2)
80
70
60
50
40
30
20
10
0
Wuhan
Zhengzhou
Changsha
Nanchang
Taiyuan
Hefei
Numbe of
univesities(unit)
number of college
students (10000)
Number of Graduate
(10000)
Fig. 2 Personnel Reserve of Six Capital Cities in Central in 2006.
(Source: data of Fig.2 comes from “China city Statistical Yearbook2006”.)
2.3 Obvious advantages of natural location and traffic
Wuhan lies in the middle reach of Yangtze River and is geographically in the convergence point of
the eastern and western regions. Traffic conditions of Wuhan are favorable: the Yangtze River and
Hanjiang River are two golden waterways, Jingguang railway and Beijing-Kowloon railway cross in
Wuhan. There are extensive highway network and 158 flights to more than 60 large and medium-sized
cities (some flights to Fukuoka, Seoul, Bangkok and Hong Kong and Macao). Passengers and cargo per
year are the most among the central six capital cities. This makes Wuhan a unique transportation hub in
central China. (Tab. 3)
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Tab. 3
Cities
Traffic Comparison among Six Capital Cities in Central in 2006.
Hefei
Wuhan
Zhengzhou Changsha Nanchang Taiyuan
Passenger volume(10,000)
5431400
2165000
1073600
883800
496650
7813
Cargo(10,000 tons)
13127300
2991000
1539900
1539900
18717
6776
(Source: data of Tab.3 comes from “China city Statistical Yearbook2006”.)
2.4 Relatively competitive city financial system
(1) Profound financial historical accumulation
As the mega-city in central regions, Wuhan is the regional economic center in history and the
strategic nodes of resources, information, technology and other exchanges between eastern and western
regions. There are modern banking financial sector with the traditional vote of both banks in Hankou in
the middle of the 19th century. Since the early 20th century to the middle, the financial ability of Wuhan
had further developed, like a regional financial center. On the one hand, its financial markets link up
with Shanghai and were affected by Shanghai; on the other hand, it had a strong concentration for the
broad masses of the central hinterland.
(2) Various types of financial institutions
There is the coexistence of a variety of financial institutions in Wuhan, with the diversified
financial system. There are 24 banking financial institutions, 29 insurance companies, and 39 securities
companies. And it has formed a diversification pattern with banking, securities, insurance, trust,
financial companies, and other financial institutions coexist (Tab. 4).
Tab. 4 The Number of Financial Institutions in Wuhan in 2006.
Institutions category
Unit(s)
Chinese-funded banks
24
Foreignbank and representative offices of foreign banks
5
Financial companies
4
Trust and Investment Corporation
2
Pawnshop
15
securities companies
39
insurance companies
29
futures companies
7
(Source: data of Tab.4 comes from “China city Statistical Yearbook2006”).
(3) Cross-regional pattern of financial management
Wuhan has become the regional management centers of banking, securities, insurance. Wuhan
Branch of the People's Bank has jurisdiction of Hubei, Hunan, Jiangxi provinces, charging with the
implementation of monetary policy and the payment and settlement functions. Some joint-stock
commercial banks such as China Communication Bank, China Merchant Bank and Wuhan Branch of
the China Everbright Bank have been involved in the jurisdiction of the Nanchang and Changsha.
(4)The loan and deposit scale of Wuhan is the most in Central
The total deposit and loan size of Wuhan ranked the first in the central six capital cities in 2006
(Tab. 5). Domestic and foreign currency deposits and loans of all financial institutions in Wuhan is
respectively Zhengzhou’s 1.32 and 1.35 times, Changsha’s 1.70 and 1.47 times, Taiyuan’s 1.49 and 1.55
times, at the same period. Deposit and loan sizes of Wuhan stand out in Central to gather important
financial resources.
Tab. 5 Domestic and Foreign Currency Deposits and Loans of Central Six Capital Cities
Wuhan
Zhengzhou
Changsha
Nanchang
Taiyuan
Hefei
Cities
4684.32
3560.00
2756.80
1791.06
3152.64
1862.46
Deposit(thousand
millions yuan)
3673.68
2722.90
2482.50
1221.92
2371.06
1743.01
Loan(thousand
millions yuan)
(Source: the data of Tab. 5 according to six cities national economic and social development communiques in 2006.)
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2.5 Increasing external support platform
The National Economic Work Conference emphasized the promotion of coordinated development
of regional economy in 2003 and 2004. National economic work meeting devoted to the issues of
central China in 2005. At the end of 2007, Wuhan "1 +8" city circle and Changsha "Changzhutan"
metropolitan were pointed by the State Council as the "two-oriented society" experimental zone of
comprehensive reform, Wuhan awarding the most powerful government policy support.
3 Weaknesses of Wuhan to Establish Central Regional Finance center
Compared with the other central capital cities, the position as a central region financial center of
Wuhan has been basically established. However, compared with the established financial center cities
(such as Beijing, Shanghai, Shenzhen), and even with the other major cities (such as Guangzhou and
Nanjing), there are still considerable weaknesses of Wuhan. (show in Tab.6).
Tab. 6 The Gaps between Wuhan and Domestic Important Financial Center.
specific performance
weaknesses
Weak industrial base
Lack of professional financial personnel
Lack of strong financial enterprises
The sum of domestic and foreign currency deposit and
loan is comparative low
The internal structure of the financial industry is not
balanced developed
Lack of driving-force of financial innovation
Lack of introduction foreign banks
Credit environment is to be improved
lack of modern city-reliance, industries is weak in
Wuhan and its hinterland
absorb and cohesion various talents in Wuhan is not
high
leading financial institutions in a corporate bodies is
few Wuhan
financial institutions balances of Wuhan are much
lower than Beijing, Shanghai; the premium income of
insurance is less than average volume of 19 deputy
provincial cities
the banking, securities and insurance sectors
respectively takes the financial industry assets share of
90.5%, 2.8% and 2.0%
financial innovation products are low-level, technical
content of them is not high; innovative ability is weak
foreign banks in Wuhan is few, low dependence on
external
There is a high proportion of non-performing loans in
banking institutions in Wuhan
4 Opportunities of Wuhan to Establish the Central Regional Financial Center
As "Wuhan 1+8" city circle was confirmed as one of reform pilots of the two types of society by
the State Council, the position of Wuhan in central China has been pushed to the historical height.
Wuhan city is faced with the best opportunity of development. This includes not only the governmental
policies, but also the better environment of credit and investment; not only for the agriculture and
industry, but also for the Third-Industry, especially the financial industry.
When we look out of Wuhan city, economy of Hubei province is proceeding with the high speed.
The GDP of Hubei province has increased 14.5% in 2007, and financial industry has increased 7.6%.
And when we look at a wider world—our country, we can get more optimistic information. Finance
innovation and finance development has got great achievement though they have experienced serious
risk in recent years. Those make a favorable environment for Wuhan to establish the Central Regional
Financial Center.
5 Threats of Wuhan to Establish the Central Regional Financial Center
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The building of Wuhan regional financial center is a complex and systematic project. Considering
the reality of the central financial situation, we believe that the threats building the regional financial
center in Wuhan can be the following ones:
(1) The money market needs to be improved
To strengthen the currency market and make a breakthrough to financing channels, we must
introduce the world's leading currency brokerage firms through the establishment of currency broker
system, actively develop the money market brokerage firms, and widen the currency market space.
Instrument clearing system need to be perfected and the scope of city settlement is waiting to be
expanded to accelerate the capital flow rate.
(2) The financial circle of Wuhan metropolitan needs to be created
Wuhan is now surrounded by eight cities: Xiaogan, Xiantao, Huangshi, Ezhou, Huanggang,
Xianning, Qianjiang and Hanchuan. They have realized bank notes city liquidation. These laid a good
foundation for the formation of "1 +8"city financial circle. If it can be further relaxation on the basis of
canceling the geographical restrictions of financial operations, such as setting up of bank branches in the
eight cities and operating cross-regional financial services, financial center in Wuhan may give full play
to the combined and spread function.
(3) The building of commercial finance district (CFD) in Wuhan needs to be accelerated
From the vector of a regional financial center, we should focus on building of the commercial
finance district (CFD). We must introduce foreign banks and the consortium to Wuhan and attract
outstanding financial talents. And we should create conditions for trinity center: management center,
regional financial transaction center and information center.
(4) The financial organization system needs to be perfected
We should actively adopt preferential policies to introduce financial institutions with high-profile,
large-scale, advanced management and good economic returns at home and abroad. Some financial
institutions in Wuhan with good economic returns, good credibility and large scale have to be
encouraged to open window to the surrounding provinces and other areas. In addition, it is necessary to
nurture excellent financial institutions in order to make city financial institutions in Wuhan bigger and
stronger in a relatively short time. And the competition for the central regional finance centre is severe.
6 Conclusions and prospects
Concluding the above discussion, we may state the following:
1 Compared with the other central capital cities, Wuhan city has the remarkable strengths to
establish the central regional financial center. But compared with the other domestic financial center, the
weaknesses of Wuhan are also obvious. Considering the reality, the opportunities are inspired and the
threats are realistic as well.
2 Based on the SWOT analysis, it is feasible to establish central regional financial center in
Wuhan, though there has a long way to go. We must work out the strategic objectives and plan the
concrete steps for Wuhan and it is very crucial to explore the strategic areas and breakthrough.
At the same time, there are still spaces for further studying on this topic. We hope the other ones,
who are interested in some questions joining us, such as, how to building an ideal money market, how to
plan the CFD, etc...
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References
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[2] Patrick HT. Financial development and economic growth to undeveloped countries, Economic
Development and Cultural Change,1966,34(4):174-189.
[3]ZHANG Jun-zhou. Regional Finance in China. [M]. Beijing: Economy Science Press, 1995:28-156.
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