1 Analyzing Xinhua’s promotion of Xi’s ‘path of financial development with Chinese characteristics’
Xinhua promotes Xi’s ‘financial thought’
June 19
The Xinhua News Agency Research Institute published an 18,000 character report titled, “The Living Source and Value Inspiration of the Path to Financial Development with Chinese Characteristics — Tracing Comrade Xi Jinping’s Important Discourses and Practices on Finance During His Tenure in Fujian” (中國特色金融發展之路的源頭活水與價值啟示－溯源習近平同志在福建工作期間關於金融重要論述與實踐).
The report reviews Xi Jinping’s important remarks and practical efforts related to finance during his time in the Fujian provincial government. The report then uses Xi’s remarks and actions to make the case for the “theoretical system, practical evolution, and global influence” of Xi’s so-called “path of financial development with Chinese characteristics.”
The report is divided into three main parts. It argues that finance is a matter of “national importance,” a key element of China’s overall modernization strategy, and a reflection of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. Notable segments and content in the report include:
i) “The theoretical origins and distinct features of the path of financial development with Chinese characteristics”
- The report promotes the “two integrations” (兩個結合), or the integration of the basic principles of Marxism with China’s realities and the integration of Marxism with fine traditional Chinese culture.
- The report identifies three distinct features of China’s financial development path:
- The organic integration of political leadership and professional expertise (i.e., Party control over finance).
- The coordinated advancement of efficiency and equity (finance serving the people).
- The dynamic balance between autonomy and openness (following China’s own path while engaging in global openness).
ii) “The living source of the path: Fujian as a testing ground”
- The report noted that Fujian was an “experimental zone” for Xi’s financial thought and practice, including financial system reforms, financial support for poverty alleviation, risk prevention and control, innovation in forestry finance, and support for private enterprises.
iii) “China’s experience as inspiration for the world”
- The report claims China’s model offers three “paradigm shifts” to global finance:
- From a “money game” to serving the real economy.
- From a “wealth machine” to inclusive resource distribution.
- From a “source of crises” to a stabilizing shock absorber.
- It promotes China’s global leadership and model value in areas such as:
- Inclusive finance.
- Green finance.
- Financial risk prevention.
- Financial openness.
Backdrop
The Xinhua report was released against the backdrop of persistent deflationary pressures in China and capital outflows, as well as incessant rumors and speculation in overseas Chinese-speaking circles that Xi Jinping has “lost power.”
Our take
1. The Xinhua News Agency Research Institute report promoting Xi Jinping’s “financial thought” has several political, propaganda, and economic purposes and implications:
i) The report demonstrates the CCP’s continued adherence to Xi’s political thought, reinforces Xi’s “core” status, and emphasizes Party’s absolute leadership over all aspects in the regime.
The notion that the “Party leads everything” is most evident in the report’s call for the “organic integration of political leadership and professional expertise.” The CCP’s need to control finance and ensure financial stability justifies the Xi leadership’s anti-corruption efforts targeting the financial sector and power reallocation in the financial system, especially after the 20th Party Congress. The Xinhua report also provides the theoretical framework for the Xi leadership to justify the Party’s continued monopoly and control over financial resources in the PRC.
Meanwhile, the report’s attempt to link the origins of Xi’s “financial thought” to his tenure in Fujian is an attempt to strengthen the theoretical and historical contributions of the so-called “Xi core” to the CCP’s governance. The “validation” of the “practical and scientific nature” of Xi’s “path to financial development with Chinese characteristics” in the Xinhua report helps to solidify his personal dominance over China’s financial policies and overall “quan wei” (authority and prestige) in the regime.
The contents of the report, as well as its release and promotion, indirectly debunk the rumors and speculation that Xi Jinping has “lost power.” In particular, the report undermines the claim that so-called “reform-minded” Party elders and “anti-Xi” senior officials are in charge with its clear emphasis and promotion of Xi’s political thought and policy framework; if Xi were truly sidelined, the CCP would have no need to uphold his “incorrect line” and would instead issue propaganda advocating the restoration of Deng Xiaoping’s reform path and other reform-minded content.
ii) The report seeks to conceal problems in China’s financial system in what is likely a move by the Xi leadership to bolster domestic and external confidence in China amid financial sector purges, stabilize the domestic financial situation, attract foreign capital, downplay financial risks, and counter growing efforts abroad to decouple from China.
- Downplaying financial risks: The report strenuously downplays and denies the current systemic risks in China’s financial system with phrases like “China has not experienced a systemic financial crisis” and “risks are controllable.” Meanwhile, the report claims that the West is the “source of crises” and underscores “risk prevention” as a response to latent financial crises.
- Discouraging decoupling and outflows: The report repeatedly emphasizes “openness and inclusivity” and pledges the “steady promotion of high-level financial opening up.” This rhetoric appears to be an attempt to remind foreigners of the positive “China experience” of the early 2000s and counter international narratives that China is closing up under Xi Jinping.
- Diverting attention from China’s troubles: The report uses concepts like “inclusive finance” and “green finance” while avoiding mention of critical issues like asset bubbles, debt problems, and bad bank debts. This reinforces the image of China having “institutional advantages” and “international leadership” while obscuring ongoing financial crises.
- Justifying purges and regulation: The report uses rhetoric like “serving the people” and “common prosperity” in talking about the CCP’s efforts to mitigate social tensions and ensure financial stability. This is an attempt to mask the intensified financial sector purges and regulations over the past two years. In doing so, Beijing is likely hoping to justify the damage that the anti-corruption campaign caused to the real economy and restore public confidence in the financial sector.
2. Even as it extols the importance and legitimacy of Xi Jinping’s “financial thought,” the Xinhua report indirectly exposes problems in China’s financial system, the Xi leadership’s concerns, and theoretical shoddiness.
A glaring sign that the report is more propaganda than a practical roadmap for financial development is its emphasis on Xi’s time in Fujian as the “living source” of his “financial thought.” Xi served in the Fujian government from the late 1990s to the early 2000s, and his experiences at the time (dealing with rural credit cooperatives, overseeing forest rights loans, etc.), even if they were successful, unlikely correspond with China’s current financial realities and the complexity of the modern financial system. Therefore, the report fails to validate the “correctness” of Xi’s financial thought in guiding China with its present problems and provide a compelling argument for why Xi’s political theory should be advanced aside from further entrenching the Xi cult of personality.
Another sign that the report is more propaganda than a practical policy framework is its promotion of vague concepts like “inclusive finance” and “green finance.” Particularly when China faces a sluggish economy, weak consumption, and growing unemployment, those concepts do nothing to address structural issues in China like the misallocation of financial resources, financing difficulties, and elevated financial risks. Instead, the concepts are nice-sounding slogans used to champion so-called “China’s global leadership” in finance, but without any practical value.
The report’s touting of the “institutional advantages” of the “Chinese model” and juxtaposing that model with the Western one reveals the CCP’s anxieties with its current situation. Notably, Beijing is concerned with external pressures like technological restrictions, decoupling, and the exodus of foreign capital, as well as internal challenges like economic recession and low confidence in the Chinese economy.
Finally, the report’s focus on Party leadership, serving the people, and common prosperity is essentially an attempt by the CCP to justify its need to strengthen control over the financial sector, the allocation of financial resources, and bolster Party legitimacy. The Xi leadership is likely hoping that its new social contract with the Chinese people — more equitable distribution of resources instead of “disorderly expansion” — would lower social tensions and mitigate the chilling effect its anti-corruption campaign and regulations are having on the markets and private enterprises.
2 Beijing’s push to elevate Shanghai as a global financial hub signals high-stakes ambition
Accelerating Shanghai’s development as a financial hub
June 18
The Central Financial Commission has issued a document titled, “Opinion on Supporting the Acceleration of Building Shanghai into an International Financial Center” (关于支持加快建设上海国际金融中心的意见).
The Opinion and its accompanying action plan are aimed at implementing directives from the Third Plenum of the 20th Central Committee to “accelerate the development of Shanghai as an international financial center” and from the Central Financial Work Conference to “enhance Shanghai’s competitiveness and influence as a global financial center.” The Opinion lays out the key tasks and policy tools for Shanghai’s financial development over the next five to 10 years, and calls for building Shanghai into an international financial center that matches China’s overall national strength and global influence.
The Opinion said that Shanghai’s development will be:
- Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and the “Eight Adherences” to pursue the path of financial development with Chinese characteristics. (The “Eight Adherences” are adhering to the centralized and unified leadership of Party Central over financial work, adhering to a people-centered value orientation, adhering to serving the real economy as the fundamental purpose of finance, adhering to risk prevention and control as the eternal theme of financial work, adhering to the advancement of financial innovation along market-oriented and law-based principles, adhere to deepening financial supply-side structural reform, adhere to coordinating financial openness and security, and adhere to the general principle of seeking progress while maintaining stability.)
- Focus on the two major breakthroughs of “deepening financial system reform” and “enhancing financial internationalization.”
- Centered on the main theme of “enhancing competitiveness and influence.”
The Opinion lays out key measures across six major areas:
1. Deepening financial market development
- Promote the growth of multi-tiered equity, bond, and asset-backed securities markets.
- Strengthen the STAR Market’s focus on “hard technology,” improve the quality of listed companies, and support corporate mergers and acquisitions.
- Build world-class futures, currency, and foreign exchange markets, and enhance Shanghai’s pricing power.
2. Elevate the capacity of financial institutions
- Attract large domestic and international financial institutions, financial holding companies, international financial organizations, and asset management firms to cluster in Shanghai.
- Advance reforms of state-owned financial enterprises, and improve their global competitiveness.
3. Improve financial infrastructure
- Develop globally advanced infrastructure for payments and clearing, trust registration, and gold trading.
- Strengthen cross-border renminbi payment systems, and improve trust transfer and gold trading systems.
4. Expand high-level two-way financial opening
- Align with high-standard international rules and promote institutional opening-up.
- Optimize cross-border financial services, and encourage innovation in reinsurance, offshore finance, and shipping insurance.
- Promote Belt and Road financial cooperation and establish a system for monitoring cross-border capital flows.
5. Improve support for the real economy
- Establish pilot zones for technology finance, and build standards and product systems for green finance.
- Advance digital finance, inclusive finance, elderly care finance, supply chain finance, and develop Shanghai into a fintech center.
- Support Yangtze River Delta integration and enhance financial support for business financing and technological innovation.
6. Ensure financial security under open conditions
- Use technologies such as blockchain, big data, and AI for forward-looking risk prevention and control.
- Improve systems for monitoring cross-border capital flows, macroprudential evaluation, and central-local regulatory coordination.
- Strengthen legal protection mechanisms and consumer rights protections.
The Opinion called for establishing a high-level coordination mechanism for the undertaking led by the Central Financial Office, Shanghai Municipal Party Committee and government, the People’s Bank of China, and regulatory agencies. The Opinion also called for ensuring regular progress reviews and dynamic resolution of major issues to guarantee effective policy implementation.
Our take
1. The CCP has two strategic reasons for stepping up the development of Shanghai into a global financial hub at this time.
The first reason is that developing Shanghai fits the CCP’s strategic goal of having a financial hub to service its Belt and Road Initiative and advance the internationalization of the renminbi. Aside from the recently released Opinion, the Central Financial Commission, National Financial Regulatory Administration, and other government organs issued an important document in early June 2025 urging “support for Shanghai to become a hub for RMB internationalization and financial services for the Belt and Road.” As large amounts of Chinese capital, technology, and materials flow with the expansion of the BRI, the cross-border use and settlement volume of the RMB will correspondingly grow. China’s cumulative investments, loans, and engineering contracts in emerging markets across Asia, Africa, Latin America, and others exceeded $1.2 trillion in 2024, according to the Refinitiv BRI Database. And according to the 2024 RMB internationalization report released by the People’s Bank of China, the cross-border RMB payment and receipt volume with countries participating in the BRI reached 8.3 trillion yuan from January to August 2024.
As Beijing promotes RMB internationalization, it needs to provide overseas holders of the yuan with more hedging and allocation tools to strengthen the RMB’s position in international capital markets. If Shanghai is more developed as an international financial center, it could gradually replace the roles of Hong Kong and London as transaction and settlement hubs, providing services such as international clearing, financing, risk management, and capital market support for BRI project financing.
Beijing could also be seizing a strategic window to elevate Shanghai as a global financial center, capitalizing on U.S. market volatility under President Donald Trump’s second term. The CCP could leverage its narrative of “the East rising, the West declining” and “great change unseen in a century” to position Shanghai as a counterweight to Western financial hubs. Trump’s trade policies, including 55 percent tariffs on Chinese goods implemented in April 2025, have fueled U.S. equity market fluctuations, while the Federal Reserve’s cautious stance on rate cuts amid persistent inflation risks further turbulence. The CCP aims to channel this instability to bolster Shanghai’s role in RMB internationalization and BRI financing.
Beijing could be hoping that Shanghai could emerge as a viable safe haven for capital fleeing the U.S., and hence decided to accelerate the city’s development as an international financial hub. But even as global capital flows are visibly “de-dollarizing,” inflows into China (especially via Shanghai) have not significantly increased. Rather, the bulk of global capital is moving into Europe, Japan, and traditional safe-haven assets like gold. Shanghai’s aspirations also face hurdles, including capital controls and regulatory uncertainty (see second point), which limit its ability to supplant established hubs like Hong Kong or London.
2. While the initiative is strategically sound, the CCP faces steep hurdles in accelerating Shanghai’s development as an international hub.
i) The PRC’s institutional constraints pose formidable challenges to Shanghai’s aspiration to become a premier global financial center. A key prerequisite for such status — free convertibility of capital accounts — remains elusive, as the State Administration of Foreign Exchange and the People’s Bank of China maintain stringent controls over foreign exchange and cross-border capital flows. Multiple layers of regulatory approval and informal “window guidance” hinder the flexible movement of large-scale capital, deterring foreign investors wary of liquidity and repatriation risks. These structural limitations undermine Shanghai’s ability to rival established hubs, despite Beijing’s push to elevate its role in RMB internationalization and Belt and Road financing.
Pervasive Party oversight and elevated political risks continue to erode foreign investor confidence in Shanghai’s bid to become a premier global financial hub. The CCP’s insistence on absolute control undermines Shanghai’s credibility, as the absence of judicial independence, robust rule of law, and rigorous contract enforcement — hallmarks of trusted financial centers — deters international capital. Regulatory unpredictability further complicates risk assessments for global financial institutions, with abrupt policy shifts over the past three years, including crackdowns on internet finance and platform economies, real estate debt containment measures, ad hoc regulatory restrictions, and the 2020 Hong Kong National Security Law, amplifying investor unease.
Compounding these challenges, persistent concerns over the reliability of China’s official economic data and widespread financial misreporting by listed companies deepen skepticism about Shanghai’s market transparency. Foreign investors, wary of inaccurate market indicators and corporate financial statements, are reluctant to allocate capital to the city, hobbling Shanghai’s prospects of overtaking established financial hubs, despite Beijing’s ambitious policy initiatives.
ii) The rise of Shanghai as an international financial hub may come at the cost of Hong Kong’s weakening. In the worst-case scenario for the CCP, Shanghai’s development as an international financial center would fail and Hong Kong’s established role as an international financing hub would be eroded, leading to a “double loss” for China’s financial internationalization.
In recent years, Beijing has intensified efforts to establish Shanghai as a preeminent global financial hub, positioning it as a potential successor to Hong Kong. This strategic shift is evident in the relocation of key operations by major state-owned banks, securities firms, insurers, and futures companies, which have increasingly chosen Shanghai for their headquarters, product innovation initiatives, and national policy pilot programs. Complementing these moves, both the central government and Shanghai’s municipal authorities have rolled out targeted incentives, including expanded issuance of financial licenses, preferential resource allocation, and policies designed to lure corporate headquarters to the city, underscoring Shanghai’s ascendance at the expense of Hong Kong’s traditional financial dominance.
Efforts to diminish Hong Kong’s financial prominence risk a cascading decline in its fundraising capacity, eroding the ability of mainland Chinese companies to secure capital in the city. For decades, Hong Kong has been a vital conduit for global capital flows into China, offering unparalleled transparency and openness. It remains the primary hub for Chinese firms issuing offshore RMB bonds. Yet, Beijing’s strategic pivot — marked by a reallocation of state-owned enterprise resources to mainland centers like Shanghai — has precipitated a sharp drop in Hong Kong’s IPO activity. In 2024, IPO proceeds plummeted to approximately HK$57 billion, a ten-year low, with both the number and scale of mainland listings in Hong Kong contracting significantly. This downturn has kindled concerns about Hong Kong’s enduring role as Asia’s premier fundraising center. The imposition of the Hong Kong National Security Law in 2020 has further eroded investor confidence, prompting international capital to reallocate to alternatives like Singapore. Consequently, the erosion of Hong Kong’s status as China’s sole globally trusted offshore financial platform threatens to constrain the mainland’s access to international capital markets and impede its cross-border financing capabilities.
