Shanghai's efforts have been less public. They have also been harmed by a spreading corruption scandal that has led to the arrest of the city's top Communist Party official and a growing number of business leaders. But as the traditional center of Chinese business life, Shanghai still has many allies in the capital. It has also emerged as the center of Chinese bond trading and as a favorite headquarters for Chinese and foreign companies.
City leaders and academics point out Shanghais biggest advantage: The currency circulating in the streets and markets is the yuan, which foreigners can buy and sell only with difficulty. Hong Kong, a special administrative region of China, has its own currency, the Hong Kong dollar, which is linked to the U.S. dollar.
The Hong Kong dollar is internationally convertible but cannot be easily exchanged for yuan on the mainland because of China's capital controls. "The independent monetary system restricts Hong Kong's ambition to become the financial capital of the country," said Pan Yingli, a professor in the School of Management at Shanghai Jiaotong University.
While Shanghai overshadowed Hong Kong in many ways before World War II, Hong Kong regained leadership after the communist takeover in 1949, and benefited from the emigration of thousands of Shanghai business people. But in the 1990s, the rise of a Shanghai faction of politicians in China, including President Jiang Zemin, resulted in many policies that favored their city Since taking China's top jobs in late 2002 and 2003, President Hu Jintao has tried to limit Shanghai's influence. With the city mired in its corruption scandal, Hong Kong is trying to seize the initiative again.
Experts doubt that Hong Kong leaders would succeed in persuading the Chinese government to give their city clear regulatory preference over its rival to the north. "Shanghai is in a temporary eclipse because of these political factors," said Jack Lange, a partner in the Hong Kong office of the Paul, Weiss law firm. "But Shanghai is where it's happening -- if there is going to be a domestic financial center that gives Hong Kong a run for its money, it's going to be Shanghai."
NY Times / Keith Bradsher and David Barboza