Search

As increasing numbers of developing countries seek to build their own international financial centres, it is critical to take account of this new phenomenon in the realm of development studies. Previous development theories have devoted a great deal of attention to the analysis of industrialisation in the manufacturing sector, but insufficient attention to this new subject. At odds with neoliberal laissez-faire evolution, the financial statism identified in this thesis as (a) state ownership in the financial sector; (b) financial restraint policies; and (c) state control over capital mobility and currency convertibility, suggests an alternative approach adopted by the Chinese state to develop Shanghai into an international financial centre from the 1990s. It is argued that IFCs’ development is multi-faceted and can only be addressed in a country-specific context. The study demonstrates that due to the imperfection of institutions and infrastructure in China as a transitional economy in the 1990s, financial statism has played an active role in maintaining socio-economic stability at macro level, creating market institutions and urban infrastructure at meso-level and precluding exogenous financial risks at meta-level. Despite the observation of several disadvantages and deficiencies, financial statism has successfully transformed Shanghai into a domestic financial centre at the nascent stage of China’s financial development. Utilizing a process-tracing method, it was also discovered that given recent contextual changes, the Chinese state has started to withdraw its financial statist regime, paving the way for a more open and liberalised market system to further transform Shanghai into an international financial centre. The thesis concludes that market-driven and state-led development can be complementary and financial statism might serve as invisible scaffolding in the development of an IFC, particularly in large, fast-growing emerging economies.