With an increasing amount of international capital being invested in Shanghai through the direct mechanism in the future, it is conceivable that the Chinese stock market will have to conform to the international standard of emphasizing information disclosure and corporate governance.

Otherwise, international investors will not be attracted and will eventually bail out of the market.

At the same time, their presence will motivate Chinese listed companies and the stock market to offer better protection to investors through a safe and more reliable investment environment, thereby pushing forward the long-awaited reform in Chinese capital markets.

Regardless which city benefits more, it is clear that both should feel happy about the development. This may also settle the rivalry between Hong Kong and Shanghai to become the global center of China.

The author is a faculty fellow at the International Center for Finance, Yale University; and deputy dean of the Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University. The views do not necessarily reflect those of China Daily.