THE NEXT BIG THING

China Daily (Canada) - - ANALYSIS -

work­shop of the world.

The new gen­er­a­tion of de­vel­op­ment zones — start­ing with the much-her­alded Shang­hai one in 2013 — are in­tended to pro­pel China to its next phase of de­vel­op­ment.

Shang­hai it­self has come into some crit­i­cism for not be­ing quite the lab­o­ra­tory for fi­nan­cial re­form it was orig­i­nally in­tended to be.

Busi­nesses within the zone, how­ever, have more free­dom to make for­eign cur­rency ex­change trans­ac­tions and cap­i­tal ac­count set­tle­ments than in the rest of China.

The zone has also been oper­at­ing at a time when there was pres­sure on the Chi­nese cur­rency af­ter a re­form of the ex­change rate mech­a­nism in Au­gust 2015, which has since seen an im­po­si­tion of stricter cap­i­tal con­trols across the whole coun­try.

Wu Jian­gang, re­search fel­low at the Lu­ji­azui In­ter­na­tional Fi­nance Re­search Cen­ter at CEIBS in Shang­hai, be­lieves some of the crit­i­cism is un­fair.

“Per­haps the steps are not so big, but steps have been taken; there has been some good prac­tice and it has so far been a worth­while ex­per­i­ment,” he says.

“We can­not just open the cap­i­tal ac­count, par­tic­u­larly when there have been pres­sures on the yuan over the past two years.”

Ed­ward Tse, founder and CEO of man­age­ment con­sul­tants Gao Feng Ad­vi­sory, be­lieves the gov­ern­ment is right to con­tinue with the model and roll out new FTZs this year.

“The Chi­nese gov­ern­ment has done this re­ally well over the past few decades. They have ex­per­i­mented with pol­icy by launch­ing these pilots, and it has been a model for Chi­nese de­vel­op­ment. It is a smart idea, and I think it is a good phi­los­o­phy.”

Wu at CEIBS be­lieves FTZs pro­vide a so­lu­tion for China be­cause it would be dif­fi­cult to ex­per­i­ment with pol­icy on a na­tional level.

“China is a very big coun­try and there­fore it is more dif­fi­cult to re­form. It is also not like the United States, where ev­ery state has its own laws. China’s prov­inces op­er­ate un­der na­tional laws and reg­u­la­tions,” he says.

“The FTZs give China the op­por­tu­nity to de­velop in­no­va­tive poli­cies and see if they work in prac­tice.”

Con­tact the writ­ers through an­drew­moody@chi­nadaily.com.cn

LI MIN / CHINA DAILY

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