Shanghai Surprise

In this week's cover of Newsweek International, we explored whether Shanghai is the new Detroit. Now, I'm beginning to wonder if it may soon be the new Wall Street. As I've written and blogged in the past, the fact that the world's top three banks by market capitalization are now Chinese isn't as big a deal as it might seem -- they are still local, commercial players, not global investment banks a la Morgan Stanley or Goldman Sachs.

But this week, Liu Tienan, Deputy Director General of China's National Development and Reform Commission, announced his country's intention to create by 2020 a financial center "appropriate to China's economic power and the international status of the RMB." Liu stressed that China's financial sector should be not just "big, but strong." Despite the market downturn, the Chinese are launching their own version of NASDAQ later this month, in order to help fund small and mid sized businesses that aren't benefiting as much from the massive stimulus package (yet still create the majority of jobs). They are also moving ahead with developing more complex securities (though not those crazy credit default swaps that tanked markets over here), and making their currency more convertible. For more on this, check out a longer story on the topic by our Shanghai correspondent Duncan Hewitt in next week's international magazine.

All of it underscores just how economically competent and confident the Chinese are. They could have used the financial crisis as a reason to turn their back on capital market reform -- instead, they are pushing ahead with it, and will likely gain global financial market share as a result. Wen Jiabao recently said as much when he told the Chinese that this is a moment for "more, not less" reform. It's such a cliché, but I'm reminded yet again of the fact that the Chinese use the same character to write "danger" and "opportunity."