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Global Financial Centres Index 22 Summary

Core Content and Overview

The Global Financial Centres Index (GFCI 22), released in September 2017, evaluates the competitiveness and attractiveness of financial centres worldwide. It is a collaborative effort between the China Development Institute (CDI) in Shenzhen and Z/Yen Partners in London, with a strategic partnership established in July 2016 to enhance research into financial centres. The index is updated biannually in March and September and serves as a key reference for global financial policy and investment decisions.

Key Highlights

• Top Financial Centres: London and New York retained their top positions, with London only dropping by 2 points, the smallest decline among top 10 centres. Hong Kong overtook Singapore for third place, while Tokyo remained in fifth. The gap between second and third place was reduced to 12 points, the smallest in over five years.
• Regional Performance:
  • Asia/Pacific: All top 10 centres declined in ratings, with notable drops in Singapore, Tokyo, and Osaka.
  • North America: All centres fell, with New York experiencing the largest drop.
  • Middle East and Africa: Abu Dhabi improved significantly, moving up 3 places and increasing its rating by 2 points. Dubai also rose, narrowing the gap with Abu Dhabi to 9 points.
  • Eastern Europe and Central Asia: Most centres saw improvements, with notable rises in Warsaw, Riga, and Prague.
  • Latin America and the Caribbean: The British Virgin Islands and the Bahamas showed strong gains, while Buenos Aires was added to the main index.
  • Western Europe: Some centres like Frankfurt, Dublin, and Amsterdam rose, while Zurich, Geneva, and Luxembourg fell. The 'island' financial centres (Jersey, Guernsey, Isle of Man) performed well.
• New Entrants: Wellington, Buenos Aires, Hamburg, and Chengdu were added to the main index, increasing the total number of financial centres from 88 to 92. The number of associate centres increased to 16.

Main Findings and Trends

Overall Trends

• Confidence Drop: Leading financial centres experienced a general decline in confidence, with only two rising in the top 25.
• Emerging Centres: Many lower-ranked centres saw improvements, suggesting a shift in global financial dynamics.
• GFCI 22 Ratings: The average rating of the top five financial centres in the Asia/Pacific region surpassed that of Western Europe and North America, indicating a growing influence of Asian financial hubs.

Key Financial Centres and Their Performance

• London: Maintained first place with a rating of 780, but dropped 2 points in rank.
• New York: Second place with a rating of 756, but fell 24 points in rating.
• Hong Kong: Third place with a rating of 744, surpassing Singapore by 2 points.
• Singapore: Fourth place with a rating of 742, but fell 18 points.
• Tokyo: Fifth place with a rating of 725, remaining stable in rank.
• Abu Dhabi: Ranked 25th with a rating of 682, up 3 places and 2 points in rating.
• Shanghai: Rose 7 places to 6th, but its rating dropped by 4 points.
• Toronto: Rose 3 places to 7th, with a 9-point drop in rating.
• Sydney: Maintained 8th place but fell 14 points.
• Frankfurt: Rose 12 places to 11th, with a 3-point increase in rating.
• Dubai: Rose 7 places to 18th, with a 5-point drop in rating.
• Bahrain: Rose 6 places to 51st, with a 27-point increase in rating.
• Riyadh: Rose 1 place to 77th, with a 22-point increase in rating.

GFCI 22 Methodology

• Assessment Method: 102 instrumental factors from third-party institutions (World Bank, Economist Intelligence Unit, OECD, UN) were used to evaluate financial centres.
• Questionnaire Data: 3,159 responses were collected over 24 months, with 23,812 valid assessments.
• Correlation Analysis: The GFCI model correlates financial centre performance with five key areas of competitiveness: Business Environment, Human Capital, Infrastructure, Financial Sector Development, and Reputation.

Areas of Competitiveness

The GFCI 22 focuses on five main areas of competitiveness:

1. Business Environment: The most frequently mentioned factor, with 712 mentions. Brexit uncertainty, corruption, and protectionism were highlighted.
2. Human Capital: 684 mentions. Language skills, personal safety, and human rights were emphasized.
3. Taxation: 567 mentions. Calls for international tax harmonization and concerns over EU tax increases post-Brexit.
4. Reputation: 544 mentions. Importance of promoting financial centres and maintaining a good reputation.
5. Infrastructure: 481 mentions. FinTech infrastructure and air travel connectivity were key concerns.

Key Initiatives and Developments

• Abu Dhabi Global Market (ADGM): A significant financial hub in the UAE, with its own legal and regulatory framework. ADGM has introduced several innovative initiatives, such as a private REIT regime, FinTech sandbox, and a Venture Capital framework. It was recognized as the Top MENA FinTech Hub and Financial Centre of the Year in the MENA region.
• Mergers and Economic Strategy: The UAE government's merger of NBAD and FGB created one of the region's largest banks, and the merger of Mubadala and IPIC reinforced its economic diversification goals.
• FDI Growth: Foreign Direct Investment (FDI) in Abu Dhabi increased by over 50% from $16.6 billion in 2012 to $25.9 billion in 2016, despite global economic volatility.

Future Prospects

• Top 15 Centres Likely to Grow: Table 3 lists the financial centres most likely to become more significant in the next few years. Six of the top nine are Asian, with Shanghai and Qingdao leading.
• Investor Confidence: The report highlights the importance of a stable and supportive environment for financial institutions and investors, especially in the context of Brexit and global economic shifts.

Conclusion

The GFCI 22 reflects a dynamic and evolving global financial landscape. While traditional hubs like London and New York remain dominant, emerging and regional financial centres are gaining ground. The report underscores the importance of a strong business environment, diversified financial sectors, and innovative regulatory frameworks in maintaining and enhancing a financial centre's competitiveness. Abu Dhabi's progress and the rise of other centres like Frankfurt, Dublin, and the British Virgin Islands highlight the increasing role of non-traditional financial hubs in the global economy.