Through this post you’ll become familiar with the the Best and Top 10 Largest Financial Centers in the World. But, before that let’s understand the meaning of a financial center and what significance it holds.
Financial Center: Meaning & Importance
A Financial center is a city with a strategic location, presence of important financial institutions including banks, stock exchanges, and major industries. These cities or economic hubs largely contribute to the GDP of a country by offering high employment rates, better infrastructural facilities, and an overall improved standard of living.
So, these are some of the unique features that make such cities a favourable destination for business development and potential expansion. Picture Mumbai for example, the Financial Capital of India.
The Global Finance Centre Index (GFCI) released its 27th edition in March 2020, an index which ranks cities as top financial centers via an online questionnaire with organizations like The World Bank, Economic cooperation and development (OCED), etc. and is widely quoted as the most reliable source of ranking financial cities.
But before getting into the ranking let’s figure out the criteria according to which these rankings are established.
What Makes a City a Financial Center? Criteria Revealed
There are 5 main factors according to which the index ranks cities as biggest global financial centers.
- The kind of business environment in the city which makes sure there is no hostility in the innovation arena.
- Tracing the pace of financial sector’s development to avoid stagnation of technology,
- Making sure that the city offers good infrastructural facilities.
- Takes good care of its human capital which includes a positive work culture and fair wages.
- Other reputational and general factors.
So, without further delay let’s look into the top 10 cities that made it into this year’s Top financial cities index:
10. Los Angeles:
On the 10th we have the city of all glitter and glamour. With a population of approximately 4 million people, the City of Los Angeles or L.A is the largest city in California. You must know L.A by that huge iconic Hollywood sign on Mount Lee. The economy in The Lala land is largely driven by overseas trade, the Hollywood entertainment industry, IT, petroleum, Fashion, and tourism.
L.A made a significant jump from 19th rank in 2017 index to 10th in 2020 with a score of 723.
Next up, with a score of we have the French-speaking part of Switzerland, Geneva. The global city and financial hub is the capital of the republic and canton of Geneva. Another interesting feature that makes it one of the top financial centers is the fact that it facilitates the highest number of international organizations in the world like WTO, WHO, The Red cross committee, and many more.
Geneva too has improved itself in terms of business quality and came to 9th position in the recent report from 15th in the 2017 report of GSCI index. Although being a financial hub, Geneva is not your basic hustle bustle city and is often regarded as the “peace capital”
8. San Fransisco:
On the 8th rank, we have Sanfransico or SF, the capital city of southern California, and the 4th largest economic output producer in the United States with an approx GDP of $550 billion as of 2018. The city is known as a tourist destination for its cool summers and diverse mix of architecture and as a business hotspot for being the homeland of big brands like Airbnb and Uber as well as IT leaders like Twitter and Pinterest.
Internationally holding the 8th rank, SF holds the 2nd rank as a financial center nationally as per the GSCI index itself.
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The Chinese capital or what is often described as the “billionaire capital of the world” holds the 7th position in world financial centers for its outranking culture, politics, business, education, and technological developments. It is known for having seven of UNESCO’s world heritage sites.
It has occupied the 7th rank, twice in a row this year with a score of 734.
6. Hong Kong:
Hong Kong is another Chinese metropolitan territory inhabiting over 7.5 million people. It rule however is different than mainland China under the principle of “one country, 2 systems”. Maybe the separate governing and revenue utilization is the reason behind the territory producing the highest number of billionaires all over Asia!
The economy of HK is mainly built by its busy ports, stock exchanges, and leading infrastructural and agricultural activity placing it on the 6th rank of Global financial centers.
As clićhe as it sounds Singapore reminds us all of the Famous Univeral Studios. Who has gone to Singapore and not clicked a picture in front of that giant blue ball? seriously I want to know these rare people. Anyway, Singapore or “the garden city” is both beauty and business having the 7th highest per capita GDP in the world. It is also one of the most expensive cities (obviously) and is regarded as a tax haven.
Although It slipped from 4th to 5th rank this year, What keeps Singapore hold its rank as a financial center is the fact that it holds the highest number of wealth management and insurance companies.
Did you notice? It is the 3rd Chinese city on the list. No wonder its called the world superpower!
On number 4th, we have Shanghai often referred to as the “Paris of the East”. It is the most populous city of China and 2nd most in the world. Inhabiting one of the leading stock exchanges of the World, Shanghai is known for its dialect, cuisines, and fashion. The city re-emerged as a financial hub after the 1990 economic reforms proudly claim itself as the 4th leading Economic center in the world.
With 740 points, it lacked just 1 point from its successor in the list, Tokyo, and is predictably going to become the largest financial hub one day, according to scholars.
Now, are you ready for the top 3 leading and Best Financial centers in the World?
The capital city and financial hub of Japan, Tokyo holds the 3rd rank in the Global Index. Well, not just economic it is also the political hub of Japan where the emperor sits and the government is run from. This Alpha city is the leading center of Business and Finance which single handily holds 36 of the global 500 companies as of 2019.
Tokyo emerged as a leading financial center in the 1960s and despite having a close competition with Shanghai and Singapore it manages to hold its position in the top 3.
London has been the industrial hub since the inception of the word “industries”. Just kidding, and but it sure feels like that. The capital city of the UK has been the trade and business hub since the middle ages and is one of the most visited places on earth. It holds its present-day position in the World financial centers for its leading stock exchanges, bond trading, and banking and insurance activities.
It is, however, predicted that it might lose this stature due to the Brexit uncertainty. But if it has managed to be on 2nd position despite Brexit, who knows it might rise up even higher?
1. New York
And finally on the first rank of the Global Financial cities stands New York, often regarded as the “Financial capital of the world”. From the Central Park to the Brooklyn Bridge to the Statue of Liberty and Times Square New York is filled with iconic stuff. With a population of over 8 million, it is the most densely populated city in the United States.
People from across the globe dream of working in the city that never sleeps. It facilitates the world’s largest trade center, Wall Street along with the 2 largest stock exchanges the NYSE and NASDAQ.
The Bottom Line
This completes the list of the top Financial Centers of the World who have managed to grip on their position despite close competition with Other world economies like Dubai, Paris, Frankfurt, and more.
The recent outbreak of the Global Pandemic Covid-19 has impacted the overall GDP and functionality of all the major financial hubs due to job cuts, a sudden break in trade, low liquidity, and worsened medical situations. Each country however is coming up with numerous reforms to build up the economy again and recover from the heavy losses.
That was all about the largest financial centers in the world. If you wish to enhance your knowledge further, do have a look at the Important Financial Terms.
Hope this article was helpful for you to closely analyze the leading financial centers of the world and the reason why they hold their ranking. Don’t forget to share your feedback on these leading financial cities, your opinions are much appreciated.