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Policy measures to support industries with high growth potential, in addition to those related to finance, are key to creating global financial hubs, according to a Japanese think tank.

The research by Japan Research Institute Ltd. presents important lessons for cities aiming to improve their standings as international financial centers, such as Tokyo and Osaka.

The institute analyzed data from British think tank Z/Yen Group Ltd. on measures adopted in special financial business zones in Asian and Middle Eastern countries as well as in financial centers in cities around the world.

According to Japan Research, China provided corporate tax breaks to sectors such as information technology, accounting and management consulting and culture in its special economic zone in Shenzhen, Guangdong Province, set up in 2012, in addition to working to attract foreign talent through income tax benefits for financial experts and other measures.

Shenzhen saw its financial industry grow along with other sectors. The city rose to eighth in March 2021 from 32nd in March 2012 in Z/Yen’s Global Financial Centers Index, a semiannual ranking of cities around the world based on their financial presence.

Meanwhile, other cities focused heavily on the finance sector for growth, such as Dubai in the United Arab Emirates. A special zone for finance was set up in 2004 in Dubai, and it rose to 19th in March 2021 from 29th in March 2012.

But Dubai’s ascent stemmed from an immense amount of investment compared with other cities. As Tokyo is increasingly cash-strapped following massive spending to deal with the coronavirus crisis, it is unlikely that Tokyo can follow Dubai’s way of giving preferential treatment to the finance sector.

“Shenzhen is a better guide for Tokyo,” Japan Research researcher Takuya Nomura said. “A strategy of giving preferential treatment to the health care and renewable energies industries with growth potential so they will grow along with the finance sector is an option.”

In India, the city of Gujarat set up a special zone in 2015, where corporate tax breaks are provided to IT and financial companies and dividend income tax breaks are implemented, as part of measures to create the country’s first smart city. Many banking, securities and insurance companies came to be concentrated in the city as a result.

Although Gujarat has a smaller presence than New Delhi and Mumbai, surveys of financial workers around the world by Z/Yen have ranked Gujarat as number one since September 2020 among cities likely to become more important in two to three years.

“While it is still small, there is lots of room for growth,” Nomura said. “Cities in Japan like Osaka and Fukuoka can learn from it as they aim to become international financial centers while distinguishing themselves from Tokyo.”

Tokyo’s Global Financial Centers Index ranking stood at ninth as of September 2021, the latest survey. In the March 2020 ranking, the Japanese capital rose to third place behind New York and London on heightened expectations as an alternative to Hong Kong, which was undergoing political turmoil.

The Tokyo metropolitan government released its “‘Global Financial City: Tokyo’ Vision 2.0” on Nov. 1 this year, showing its eagerness to improve its standing by resolving social issues, promoting digitalization and attracting financial talent.

“Tokyo is aiming for the domestic public issuance of green bonds worth ¥1.6 trillion in 2025, double that of 2020, but that’s too low compared with the rise in worldwide issue amounts,” Nomura said. “There is scope to think again.”

The vision’s focus on fintech, or the integration of finance and IT, also leaves much to be improved in how finance should be linked with the broader industrial base and how growth should be promoted as a whole.

While Gov. Yuriko Koike aims to create a “global financial city on par with New York and London,” Tokyo can first look to Asian cities with rising presence for lessons, the think tank said.

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