China to establish its first financial court in Shanghai

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China's lawmakers are weighing the decision to launch a court in Shanghai to deal with cases related to financial disputes, during the NPC Standing Committee's bimonthly session.

The court will be at the intermediate level, focusing on a series of civil and administrative disputes relating to finance.

They include loans, insurance, securities, and issues involving financial authorities.

Law makers held panel discussions on the draft./CGTN Photo

Legislators held panel discussions on the draft on Thursday.

Henry Tan is a first-time legislator. As a businessman from Hong Kong, he said. "It is absolutely necessary for us to have a financial court as our companies are going global and we should have more specialized legal staff to handle financial lawsuits."

He also suggested that the financial court in Shanghai allow more assessors from Hong Kong to match international practice.

A report by China's top court says the number of contract disputes involving online shopping rose sharply between 2015 and 2017.

Courts heard 9,328 contract disputes related to online purchases in 2016, up 285 percent year on year.

Lawmaker Ren Xianliang identifies financial cases as the area needing particular attention.

He said: "More Internet-related financial cases are emerging and they involve huge amounts of capital. We should explore new ways to regulate the financial market when we are seeing an ever expanding digital economy."

The draft will be put to vote on Friday.

More legal explanations on the decision will be released by the Supreme People's Court.

NPC Deputy Henry Tan speaking at the panel discussions. /CGTN Photo

Why Shanghai?

Shanghai was selected as the venue because the city has seen a sharp rise in financial cases in recent years, and it's home to many financial institutions. According to official figures, the number of finance related lawsuits rose by 51 percent year-on-year from 2013 to 2017. In 2017 alone, nearly 180,000 such cases were filed in courts at all levels in Shanghai.

Recently, there was the notorious case involving Ezubao, which took in roughly 50 billion yuan (7.6 billion US dollars) from about 900,000 investors. And Shanlin Finance was accused of running a Ponzi scheme earlier this year as most of the financing projects listed on its platform were fake.

Although there has been no final verdict, a scam this big could easily scare away investors and put more pressure on the government to implement more stringent regulations on all micro-lending companies. There is definitely an urgent need for a special court.

The Shanghai Finance Court has been in the works for about two years. It's part of the city’s efforts to burnish its image as a global financial hub. Tribunals that specialize in financial offences and finance-related civil cases will be merged once the court is set up. Shanghai plans to transform itself into a global financial center by 2020.

More importantly, the Group for Comprehensively Deepening Reforms announced that the court will aim to “better serve the real economy, ward off financial risks and deepen financial reforms,” after a meeting chaired by President Xi Jinping earlier this year. The lawmakers I talked to have high expectations, but more details of the decisions are yet to come.