I bring this matter up as Daniel Gross has a piece in the International Herald Tribune that asks the question "The Capital of Capital No More?" about New York. I answer in the affirmative. The evidence is simply overwhelming that London beats New York in terms of volume transacted while other regional players are taking a bite out of the Big Apple:
The question today - one being asked with increasing frequency and anxiety in certain quarters - is whether New York as a whole is going the way of Wall Street. Are New York's days as the world's epicenter of finance coming to an end...?
Since the end of the cold war, vast pools of capital have been forming overseas, in the Swiss bank accounts of Russian oligarchs, in the Shanghai vaults of Chinese manufacturing magnates and in the coffers of funds controlled by governments in Singapore, Russia, Dubai, Qatar and Saudi Arabia that may amount to some $2.5 trillion, according to Stephen Jen, a Morgan Stanley economist.
Much of this money is being put to work at home. "Now countries like China are generating enormous amounts of capital," says Felix G. Rohatyn, the veteran banker who engineered the financial rescue of New York in the 1970s. "And of course they are going to want a piece of this distribution and the marketing." China is staging the initial public offerings of state-owned companies on local exchanges as a means of building up Chinese capital markets - the $7.7 billion I.P.O. of China Construction Bank in Shanghai last month is just one example.
This growth represents a triumph of everything Wall Street stands for - the ability of capital to seek returns across borders, the growing integration of the world's economy and the triumph of market activity in previously closed areas. And to a degree, this is good news for New York's asset managers, as private-equity firms and hedge funds now can raise capital from fresh sources. Nonetheless, the diffusion of wealth has unleashed angst among New York's financial elite, who may soon rue the excesses of recent years as a last-gasp blowout.
Last November, the Committee on Capital Markets Regulation, a collection of chief executives, economists and policy makers intent on halting the apparent decline of America's (and hence New York's) competitive standing in finance, presented a report full of ominous warnings: "Evidence presented here suggests that the United States is losing its leading competitive position as compared to stock markets and financial centers abroad." In January, Mayor Michael Bloomberg and Senator Charles Schumer of New York released a report from McKinsey & Company that diagnosed the malady in detail. "Today, in addition to London," the report's authors intoned, "we're increasingly competing with cities like Dubai, Hong Kong and Tokyo."
Some of the trends highlighted in these reports are troubling for the United States financial-services industry and for New York, its spiritual and historical home. The Committee on Capital Markets Regulation noted that the U.S. share of global initial public offerings - those outside the company's home country - fell from 50 percent in 2000 to 5 percent in 2005. Until recently, the directors of China Construction Bank would have seen no alternative to a New York offering. Only New York had the experienced underwriters, the highly transparent, trustworthy markets and the deep pool of capital to handle such a deal. That's no longer the case. In 2001, New York's stock exchanges accounted for half of the world's stock-market capitalization. Today, the total is more like 37 percent. In 2005, 9 of the 10 largest I.P.O.'s took place outside the United States. The world's largest-ever I.P.O., the $19.1 billion offering of Industrial and Commercial Bank of China, was staged in Hong Kong in 2006. In the lucrative field of investment banking, sales and trading revenues, the McKinsey report concluded that "European revenues are now nearly equal to those in the U.S..."
These data points represent not so much a shifting from one power center to another but rather a change in how financial power is distributed. In this decade, the global economy has become multipolar. "On the one hand, we have tremendous strengths," says Robert Rubin, the former Treasury secretary and now chairman of the executive committee at Citigroup. "We're located in the largest economy in the world. On the other hand, London is creating a regulatory environment that seems to me is equally as effective in terms of safety and soundness. Hong Kong and Singapore are clearly determined to develop as centers. The Chinese are investing in Shanghai."