GEOG 2149

Financial Geography

International financial centers I

Dr James H Lenzer Jr
Instructor
January 26, 2024
Contact details
Dr. James Hans Lenzer, Jr. (Dr. Jimmy or Dr. Jim)
Consultation hours Monday after class
Office: Room 925, 9/F, Jockey Club Tower
Also by appointment, I am on campus Thursday and Friday and
can be on Wednesday.
Email: [email protected]; [email protected]
Tel: 6249-6738

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Course Timetable
 Assessment:

• 50% coursework
– See details on following slide
• 50% final exam
– A cornucopia of short answer questions, a
compulsory comprehensive essay question and
choose one themed essay question out of three
potential options.
 Coursework specifics

• Write a short essay (2,500-3,500 words,

excluding tables, figures and references; and
preferably closer to the former in terms of
word count) by choosing one of the following
themed topics
 Coursework specifics

Theme one:
• A comparative study on two international financial
centers with Hong Kong being one of them and
another of your choosing. Your analysis should
incorporate concepts that were introduced and
covered during lectures. Keep in mind that it is
impossible to comprehensively incorporate all of
them under the word count limitation; therefore, you
should properly frame your analysis and justify your
approach.
 Coursework specifics
Theme two:
• Choose one of the
following subtopics
under the four
overlapping and
complementary
research themes and
foci of financial
geography in the
figure to the right.
• For instance, theme
one (international
financial centers) is
a subtopic of Cross-
sectoral focus.
 Coursework specifics
Deadline for Essay Submission:
• Before 23:55 via the course Moodle Turnitin upload link
on Thursday April 18th . Hardcopy to be submitted
along with a copy of the first page of the Turnitin report
with the similarity index and the departmental
coursework cover sheet, by dropping the assignments in
the ‘’Assignment Collection Box’’ 10/F, The Jockey Club
Tower, Centennial Campus before 17:00 pm the
following day (April 19th).
 Assessment:
Please note the following:
1. Late submission will be penalized according to the
Departmental policy. Read the tips and rules for
undergraduate assignments at the following
hyperlink:
http://geog.hku.hk/undergrad/studyskills.htm .
2. Collection of the marked assignments as to where and
when will be announced at a later date. An
announcement will be made via Moodle when the
marked assignments are ready for students’
collection.
 Course intended learning objectives
Upon completion of the course, students are expected to:
1. Identify the four overlapping themes of financial geography and
explain how they interact with one another.
2. Understand the defining characteristics of financial centres and the
driving forces behind their spatial agglomeration.
3. Utilize historicism to account for the development of financial markets
and where these activities occur.
4. Define and understand network theories and how they relate to global
financial networks and their implications on local, regional and global
economies.
5. Identify the different financialization processes and their social and
spatial impacts.
6. Understand the emergence of Fintech as a driving force for economic
growth in various sectors of the economy and its spatial implications.
 Three questions of financial geography

Financial geography can be defined as the study of the spatiality

of finance, guided by three basic questions:
1. What spatial forms, structures and manifestations does
finance take?
– This is about mapping finance in a broad sense.
2. Why does the map of financial phenomena look the way it
does?
a. How can we explain the spatiality of finance
b. Requires the study of forces that shape spatiality
• Behavior of agents
• Economic structures
• Institutions
• Ideas
 Three questions of financial geography

2. Why does the map of financial phenomena look the way it

does continued?
c. This implies that finance is an economic phenomenon; therefore,
economic geography is of extreme importance; however, the following
_____________ geographies are indispensable:
• Social
• Political
• Cultural
• ?
Rational and irrational behavior, property laws, financial regulations,
trust, confidence and so forth are just a few examples of how these
‘other’ geographies are applicable to understanding finance!

Can you see how these can or do possibly relate?

 Jargon

• Economic Geography is concerned with:

• Understanding how internal (local) and external (global)

economic processes together cause economic activities and
standards of living to vary from place to place
• Understanding how and why economic activities are
connected across space.

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 Jargon
Place and Space:
• Place and space are two sides of the same coin.
Inseparably connected and dependent on one
another, but representing distinctly different
perspectives
• Place is the specific location where economic
activities occur
– People live
– People work
– People consume
– Can be any size: village, county, province, nation
– Has its own mixture of habits, conventions,
norms and distinctive economic characteristics.
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 Jargon
Space is the expanse of territory across which connections are
made.
– Can be a single place or among many places
• Diverse places are connected across space by flows of goods,
services, investment, ideas, information and people.
– These connections are both complimentary and competitive
– Institutions play a role that reach out across space (both local
and global)
– Markets are intimately connected to place and space.

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 Jargon
Institutions:
• Definition: Both formal and informal, economic and non-
economic constraints on human behavior.
• Include:
– Markets
– Business organizations
• Labor market
– Governments
– Education system
– Family
– Social movements
– Habits of thought
– Routines
– ______________?
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 Institutions

Source: http://thecollaboratory.wikidot.com/thompson-social-
institutions
 Institutions

Source: http://www.gpccolorado.com/socio-cultural-institutions/
 Three questions of financial geography
3. So What?
1. What are the consequences of the spatiality of finance for the
economy, society and environment?
• Finance is a type of capital and incentive!
– Fundamental to economic growth and innovation
– Its distribution and store of value is key to inequality
– Its circulation is decisive for crisis and stability
– The relationships between financial, natural and social capital
are crucial to environmental and social stability.

I would argue, especially in terms of this course and your

assessment there is a fourth question: How?
4. How does finance shape places and spaces?
• What are the implications: economic, social, etc.?
International financial centers
 International financial centers

Long Finance & Global Financial Centres (September 2019), 55 pages. Produced by Z/Yen in
Partnership with CDI.
International financial centers
 Definitions
Financial center
– “a city or its district that has a heavy
concentration of financial institutions that offers a
highly developed commercial and communications
infrastructure and where a great number of
domestic and international trading transactions
are conducted ("financial center," 2010).”
• Basic business definition

Source: BusinessDictionary.com
 Definitions
financial center
• Early academic definition
– “a metropolitan area that has a high concentration
of financial institutions and where the financial
transactions of a given country or region are
centralized (Dufey & Giddy, 1978).”
• International financial centers are much more difficult
to define, and it is difficult for even me to find a very
good definition
 Definitions
International financial center
• Early academic definition
– IFCs on the other hand are just extension of the
domestic centres that offer the greatest
convenience to a combination of attributes such as
international communications, geographical
location, financial services and so forth (Dufey &
Giddy, 1978).
 Definitions
International financial center
• However, when it comes to an IFC it is much more
difficult to provide such a generic and concise
definition and one must look at the evolution of a
center along with its basic functions such as retail and
wholesale banking, portfolio management, insurance
and so forth (Laulajainen, 2003).
– These are actually some of the services they perform, and
they can be further classified as such
 Basic types of IFCs
Capital market center
• an IFC that hosts a stock exchange and has a large
base of firms that specialize in investment banking
activities.
• New York, Hong Kong, Shanghai, etc.
Banking center
• IFCs that lack such institutions and specialize in
banking activities
• Geneva, Beijing, Boston, etc.

But many specialize in both, much like London!

 Definitions
Global financial center
– “an intense concentration of a wide variety of
international financial businesses and transactions
in one location (Z/Yen Group, 2005).”

Z/Yen Group publishes

the semi-annual Global
Financial Centre Index!
 Definitions
Global city perspective (Saskia Sassen)
• two elements really stand out between an IFC and
GFC, national consolidation and location.
• cities with major institutional equity holdings have a
distinct advantage over those that do not, which
allows them to dominate as a national center of
operations.
• Location is critical because in order to run financial
operations, firms need a concentration of advanced
technology and infrastructure to conduct business;
and educated personnel as a result of the complexity
of information that must be interpreted and analyzed.
– What does this tell us about possible IFC attributes?

Sassen, S. (1999). Global financial centers. Foreign Affairs, 78(1), 75-87.

Global Financial Centers
1st tier IFCs

2nd tier IFCs

 International financial centers

GFCI 26

Long Finance & Global Financial Centres (September 2019), 55 pages. Produced by Z/Yen in
Partnership with CDI.
 Global Financial Centres Index 30

Long Finance & Global Financial Centres (September 2021), 63 pages. Produced by Z/Yen in
Partnership with CDI.
 Two forces promoting globalization
1. Technological factors
• Transport costs have fallen
•
•
• Communication costs have fallen
•
•
• Ultimately the speed, quality and quantity of information
flows!
• Has transformed international finance: free flows of
capital etc.
• These should be centripetal forces, but in reality, they
are centrifugal ones! (global city perspective)
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 Two forces promoting globalization
2. The rise of neoliberalism
• Liberalism and other inward statist models
(socialism) are abandoned (1980 onward)
• The four keywords: Free market, limited
government, deregulation and market
fundamentalism favor private enterprise
• Low trade barriers and secondary role of the state
for instance.
• Has profound impacts to the rise of global
capitalism, finance and financial geographies!

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 The rise of neoliberalism
• The neoliberal era began around the 1980s
• Key political leaders: The conservative administrations of
• Margaret Thatcher in the UK
• Ronald Reagan in the US
• They radically changed their economies by applying the
neoliberal ideas of the Chicago School

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 The rise of neoliberalism
• Understanding neoliberalism
• “Neoliberalism is in the first instance a theory of political
economic practices that proposes that human well-being can best
be advanced by liberating individual entrepreneurial freedoms and
skills within an institutional framework characterized by strong
private property rights, free markets and free trade.” (Harvey
2005)
• Keywords of neoliberalism
• Free market: A market free of any impediments will improve
economic welfare, bring greater individual freedom
• Market fundamentalism: “Markets will take care of all our needs”
• Deregulation: Commitment by nation-states to limit or eliminate
restraints on the free market and free trade
• Limited government: No government can do things as well as the
market and should not intervene in it 36
The General
Agreement on Tariffs
and Trade (GATT) is a
legal agreement
between many countries,
whose overall purpose
was to promote
international trade by
reducing or eliminating
trade barriers such as
tariffs or quotas. WTO
formed during Uruguay
round.

• Immediate post-WWII
period
• Tariff now?
• Are we having free
international trade?
 Yields the rise of Multinational Enterprises
• Definition
• A multinational enterprise (MNE) is company that is
headquartered in one country but controls
productive facilities and sales outlets in other
countries
• Its operations involve flows of capital, goods,
services, and managerial and technical personnel
among its subsidiaries.
• Ultimately, this leads to the enterprise assuming a
global outlook and strategy.
• Also called transnational corporations (TNC),
multinational corporations (MNC), etc 38
 Yields the rise of Multinational Enterprises
• How are MNEs able to modify the international
economic order so effectively?
• Ability to gather information
• Often due to their organization structure
• Regional HQ, regional offices and local branches
• Where do they tend to locate and agglomerate?
• Combined with modern information technology
• There enormous size!
• Have an arsenal of capital, technology, managerial skills,
global networks etc.
• Who also follows them? Service providers
including financial firms and advanced producer
service firms! = Advanced Business Services! 39
Growth in the financial sector during this era
The financial industry as a percentage of GDP in the USA
Growth in the financial sector during this era
GDP by industry in the USA in 2013
 Growth in the financial sector in Hong Kong

Hong Kong is an international financial centre and the financial services sector
remains one of its most important economic pillars, accounting for 23.4% of the city's
GDP and providing some 276,200 jobs (7.5% of total employment) in 2020

Question to ask ourselves: What is driving this growth?

https://research.hktdc.com/en/article/MzEzOTI4MDY3
Remapping Financial Geographies?

https://www.youtube.com/watch?v=gZmVaFByyE0 43
 Post neoliberalism? or populism movement?

Populism: a political approach that strives to appeal to ordinary people

who feel that their concerns are disregarded by established elite groups.

Another force! What are its potential impacts on financial geographies? 44

Thanks for your attention!

or

Any questions?