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Positioning Singapore in a new financial world order

In the recently released 26th edition of the Global Financial Centres Index (GFCI), Singapore was ranked the fourth most competitive financial centre in the world. It trails New York, London and Hong Kong, while Shanghai comes in at a close fifth place.

Positioning Singapore in a new financial world order

The author believes that Singapore’s inherent advantages continue to give it a competitive edge as a financial centre amidst such shifting economic and financial realities.

In the recently released 26th edition of the Global Financial Centres Index (GFCI), Singapore was ranked the fourth most competitive financial centre in the world. It trails New York, London and Hong Kong, while Shanghai comes in at a close fifth place. Compiled by British think-tank Z/Yen in collaboration with the China Development Institute, the GFCI is often held up as a key indicator of financial centre success.

While the rankings of the world’s top five financial centres remain relatively stable – with the exception of London, which ceded its pole position to New York – all five financial centres have seen declines in their rating scores, with the two cities experiencing the steepest declines being London (dropping 14 points from 787 to 773) and Hong Kong (12 point-drop from 783 to 771).

Given the global geopolitical uncertainties, this decline in financial centre ratings should come as little surprise.

With the United States and China embroiled in an increasingly costly trade war, financial markets in New York and Shanghai have been roiled by a significant level of volatility. While the impending Brexit has resulted in London’s fall from first place to second place in the ranking, ongoing domestic unrest has also negatively impacted Hong Kong’s ratings on the GFCI.

While Singapore does not face similar turmoil domestically, its position at the nexus of regional and global capital flows makes it particularly vulnerable to the instabilities faced by the other top financial centres.


Such instability notwithstanding, a more important point can be gleaned from the GFCI 26: The rise of Asian financial powerhouses. Seven out of 10 of the world’s top financial centres are located in Asia.

This dominance of Asian financial centres is even more pronounced in the GFCI 26’s newly-introduced FinTech (financial technology) Index, with Beijing and Shanghai leading the pack. Other Asian financial centres ranked highly on the FinTech Index include Guangzhou (4th), Shenzhen (5th), Hong Kong (7th) and Singapore (8th).

With fintech seen as the key emerging growth sector of finance, this dominance of Asian financial centres on the fintech Index portends a broader shift in financial sector dominance to Asia, and more specifically, China.

This is a point that is further emphasised by a GFCI 26 questionnaire that asks respondents which centres they consider most likely to become more significant over the next two to three years. The list included Qingdao (290 mentions), Shanghai (107 mentions), Hong Kong (55 mentions), Shenzhen (48 mentions), Beijing (42 mentions), and Singapore (41 mentions).

This growing dominance of Chinese financial centres is also evident in Collier International’s Top Locations in Asia for Finance 2018, with Chinese cities such as Hong Kong, Shanghai, Shenzhen, Beijing and Guangzhou ranked within the top 10.

Taken together, this growing pool of research reveals not only growing financial sector clout among Chinese cities, but a greater variation of their roles within regional and global financial markets.

While Beijing and Shanghai continue to play key roles as domestic banking and finance centres, Hong Kong’s position as a special administrative region with economic policy autonomy and a flexible exchange rate allows it to function as China’s main international financial centre.

Complementing Hong Kong’s position within the Greater Bay Area are Guangzhou and Shenzhen, both of which are emerging as key FinTech hubs. Qingdao’s growing prominence on the rankings is also somewhat related to Chinese regional development, since the city is centrally situated along the One Belt, One Road initiative.

Given this growing dominance of Chinese financial centres, what role will Singapore play in a global financial ecosystem that is increasingly skewed towards China? 

I believe that Singapore’s inherent advantages continue to give it a competitive edge amidst such shifting economic and financial realities.

First, Singapore is centrally located within South-east Asia and remains the region’s only major financial centre. With a nominal gross domestic product of US$2.31 trillion (S$3.2 trillion), the South-east Asian region is emerging as a major engine of global growth. 

Furthermore, South-east Asia is experiencing strong growth in fintech and Islamic finance, both of which are areas in which Singapore has developed expertise and regulatory infrastructure. 

Second, Singapore’s advantage as a global financial centre vis-à-vis its Chinese counterparts stems from its position as an independent sovereign state. 

While Singapore shares many economic and cultural ties with China, it has also emerged as a viable alternative for investors who would like to capitalise on China’s rapid economic growth but do not want to be invested directly in China’s capital markets.

Third, Singapore’s robust regulatory system continues to make it attractive to investors, especially in times of economic and political instability in the rest of the world. Yet, this is an advantage that Singapore will need to devote considerable resources and effort to sustain.

The emergence of fintech and growing digitisation among financial institutions suggests that policymakers will need to rethink their approach towards financial regulation.

While the dominance of systemically important banks and financial institutions had resulted in a strong regulatory focus on "too big to fail" financial institutions, the growing role of smaller fintech start-ups in providing financial services will likely give rise to a more fragmented financial services sector.

The increasingly interconnected nature of fintech as well as growing reliance on technology for financial transactions also mean that financial risk and contagion can emerge from technological sources and spread across small start-ups, not just larger banks and financial institutions.

In order to ensure its continued success as a leading global financial centre, Singapore will need to constant review the ways in which it governs and regulates an increasingly diverse and fragmented financial services sector that is changing rapidly.



Woo Jun Jie is an Assistant Professor at the Department of Asian & Policy Studies, Education University of Hong Kong. He is the author of the books “3-in-1: Governing a Global Financial Centre” and “Singapore as an International Financial Centre: History, Policy and Politics”.

Related topics

financial centre financial services hub Global Financial Centres Index

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