China opens new free trade zone in Shanghai
Officials add details to reform plans
SHANGHAI: China opened a new free trade zone in Shanghai yesterday in what has been hailed as potentially the boldest reform move in decades, unveiling fresh details of plans to liberalize regulations governing finance, investment and trade in the zone.
The Shanghai FTZ, which covers an area of nearly 29 sq km on the eastern outskirts of the commercial hub, was approved by China’s State Council, or cabinet, in July. State-run Xinhua news agency quoted Commerce Minister Gao Hucheng as saying that the creating FTZ was a crucial decision made in the new era of China’s reform and opening-up. “It follows the tendency of global economic developments and reflects a more active strategy of opening-up,” Gao said at the launch ceremony.
The State Council said on Friday it would open up its largely sheltered services sector to foreign competition in the zone and use it as a testbed for bold financial reforms, including a convertible yuan and liberalized interest rates. Economists consider both areas key levers for restructuring the world’s second-largest economy and putting it on a more sustainable growth path.
Some Chinese and foreign firms have already moved to set up subsidiaries in the zone. A total of 25 companies so far have been approved to set up operations in a variety of sectors, alongside 11 financial institutions, most of which are domestic banks but including the mainland subsidiaries of Citibank and DBS. Some have trumpeted the FTZ, which integrates three existing zones, as comparable to Deng Xiaoping’s creation of a similar zone in Shenzhen in 1978. Many credited that move as being crucial to China’s economy opening up to foreign trade and investment.
Skeptics, however, point to a similar scheme launched near Shenzhen, in Qianhai, last year, but that has so far failed to live up to expectations. Qianhai was presented as place for radical experimentation with China’s capital account. Analysts and economists say that the plans for Shanghai, at least, are more specific and ambitious. For example, one major planned change officials described yesterday will be in the regulations governing how foreign and Chinese individuals can invest across borders. Previously foreign and Chinese investors were only allowed to invest across the border by buying into funds regulated through either the Qualified Foreign Institutional Investor (QFII) program or the Qualified Domestic Institutional Investor (QDII) program, both of which are restricted by quotas. But Dai Haibo, deputy director of the zone administrative committee, said on Sunday that this requirement would be waived for foreign and Chinese individuals within the zone, who will be allowed to invest funds directly for the first time. He did not say whether they would also be subject to a quota.— Reuters