Shanghai Free Trade Zone

[Randy W]

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from the Washington Post:

Creeping reforms as China gives Shanghai Free Trade Zone go-ahead

 

Xi may not be able to undertake sudden, radical measures even if he wants to because vested interests linked to the massive state-owned enterprises wield considerable power and are resistant to change. The trial of former regional kingpin Bo Xilai, who retains support among grass-roots cadres in the Communist Party, has also been a distraction, with party unity a greater priority than any sudden economic change of tack.

 

In any case, Xi does not seem like a man to take China in a radically new direction, economically or politically, experts say.

 

. . .

 

The Shanghai Free Trade Zone was approved by Li’s cabinet to “explore a new path and a new mode of opening up to the outside world,” the Commerce Ministry announced last week. The official Xinhua news agency said the cabinet agreed Friday to relax some of the laws restricting foreign companies in the trade zone, without giving details.

Media reports suggest that the zone could allow for a loosening of capital controls and flow of private capital into the banking sector, while supporting Shanghai’s ambitions to become a global financial center. The move is also a step toward the full-convertibility internationalization of China’s currency, the renminbi, said Zhang Monan, economics researcher with China's State Information Center, a government think tank. But in itself, the zone will not do much to address China’s immediate economic challenges.

 

 

 

from Xinhua:

 

Shanghai FTZ to further promote China's reform, opening up: experts

"The FTZ is not a special zone or new area. Its significance lies not in striving for preferential policies but in establishing a new system in line with international standards and realizing highly efficient management in sectors like investment and trade," said Zhou Zhenhua, director of the Shanghai Municipal Government Development Research Center.

 

Experts also predicted that the FTZ will give Shanghai the role as a "free port" of RMB's internationalization.

 

The function of the FTZ will involve interest rate liberalization, currency free exchange, financial industry's opening-up, financial service innovation and some other offshore financial services, said Xu Quan, an official with the Shanghai government's financial office.

 

In the meantime, many companies are already busy working to adapt to the coming dramatic moves of vital significance.

For instance, the Shanghai Pudong Development Bank is one of them.

 

The bank has set up a team to prepare for the establishment of the new zone, said Ge Yufei, vice-president of the bank's Shanghai branch.

“Our initial plans include setting up an office within the area, and developing innovative products and services to meet various demands,” he said.

 

 

[Randy W]

An update from the Financial Times

 

De facto head of Shanghai free-trade zone departs

 

Few people expected immediate breakthroughs on financial reform. However, the near total lack of substantive changes has led to cynicism among bankers.

“It’s been mostly hype so far,” said a loan banker in Shanghai who works with small and medium-sized companies in the zone. “Nothing has really changed.”

 

In a report last month about Shanghai International Airport, one of the so-called “concept stocks” that rose sharply in the lead-up to the FTZ’s launch, Hino Lam, Goldman Sachs equity analyst, wrote: “We believe that benefits from Shanghai’s free-trade zone reform policies may take longer than expected to materialise, as we have yet to see any positive impact from it so far in 2014.”