Shanghai FTZ still a hotbed for innovation
China will take some of the lessons learned from the 18-month-old China (Shanghai) Pilot Free Trade Zone, such as simplified customs procedures, and apply them to three new pilot FTZs in Guangdong, Tianjin and Fujian.
“The Shanghai FTZ will serve more like a brain as its tests out various ideas and plays the role of an innovation incubator, whereas the other three will be like accelerators,” Tony Su, a director at real-estate services provider DTZ China, said this month.
The central government announced a detailed “negative list” on its website Monday of areas in which investment will be curbed at all four zones. The list includes 122 protected sectors, down from the 139 that were first applied when the Shanghai FTZ was set up in September 2013.
The Shanghai FTZ was officially expanded on Monday to cover 120.72 sq km including the district of Lujiazui. It is now almost four times as big as when it was originally conceived, with more reforms enacted.
The State Council has defined China’s commercial hub as a “forerunner of innovation” and tasked it with creating a more favorable environment for trade and investment, including chasing free convertibility of the Chinese yuan and more efficient bureaucracy, according to the press conference that followed announcement.
Authorities in Shanghai have been researching ways in which their free trade zone can interact with the other three so that its innovations can be easily passed along, said Jian Danian, deputy district director of Pudong.
“Shanghai’s free trade zone will strive to become a hotbed for technological innovation,” Jian said earlier this month at a forum on development and governance co-hosted by Shanghai’s Fudan University and Singapore Management University.
“Its reforms must move in step with those of the municipal government and the development of the district and the Yangtze River economic zone.”
Jian said that the launch of more free trade zones will heap pressure on Shanghai to stay on the cutting-edge of reform.
A top priority for the city in the future will be improving the function of offshore businesses.
The FTZ is becoming increasingly important for multinationals to integrate their onshore and offshore resources, as well as for local enterprises that are eager to raise funds in overseas markets.
Jian said the regulator will allow qualified financial institutions to carry out offshore financing and insurance businesses there.
The city can retain its unique status amid the flowering of similar zones around the country due to its role as an
Monday’s international financial center, said Li Shanmin, director of the Sun Yat-sen University Institute for Free Trade Zone Research.
“While the Guangdong FTZ may serve as a regional financial center, Shanghai is an international financial center as it has experience in this field,” Li said.
Since its launch, a series of policies supporting foreign trade and financial reforms have been introduced. These include liberalizing interest rates for foreign currency accounts of less than $3 million. Companies in the trade zone can also borrow money overseas under a simpler regulatory regime.
Financial reforms include pushing forward cross-border use of the Chinese currency, liberalizing foreign-exchange interest rates, establishing a foreign-currency funding pool, and opening up freetrade accounts.
Shanghai benefits from its long history of opening-up as well as its established position as China’s financial center, said Su.
The financial reforms introduced since its launch have helped to liberalize capital flows and the overall money market, which has boosted cross-border e-commerce and supply- chain financing, Su said.
The three new FTZs are based in coastal cities that neighbor developed regions.
They enjoy industrial advantages due to their relative maturity and a competitive edge that has been built up in recent decades.