Asia Briefing: Free-trade zones at heart of drive to open economy to overseas investment
A regular theme in development plans unveiled by the Chinese government – and Irish readers will see elements of Shannon in its heyday here – is to set up free-trade zones as part of a liberalisation and economic reform.
Last week, it was the turn of the Pudong area of Shanghai, with the central government in Beijing unveiling a package of policies covering industries from financial services to shipping and transport, as part of its plan to create a Hong Kong-like free-trade zone in China’s financial capital.
The headline from the package is that the zone will mean an end to a long-term ban on electronic games consoles in China – once the manufacturers make the products for the China market in the zone.
The project will cover 28sq km on the Pudong side of the city. It will make it easier for overseas banks to set up subsidiary or joint-venture operations, and for foreign commodities exchanges to own warehouses in the free-trade zone.
“The experiment is a significant step toward adapting to global development economic and trade trends, and is a proactive move toward opening up China’s economy,” ran an announcement from the State Council, China’s cabinet, after a meeting chaired by Premier Li Keqiang earlier this month.
The new zone is seen as a testing ground for free currency exchange, management innovation, trade-related financial services and other market-opening measures, and it will be “more encompassing” than the three areas already designated as bonded trade or port zones in Shanghai.
“The top priority will be innovation in the financial sector. This includes marketising the exchange rates and the interest rates, opening-up of the financial industry and offering offshore financial services,” said Xu Quan, deputy director of the Shanghai Financial Services Office.
Implementation of the trial programme is expected to take three years to complete, according to the Shanghai government, while the overall construction of the project would take a decade.
“The zone will play a positive role in promoting the yuan’s international recognition and liberalising China’s capital accounts as overseas business participants can freely convert the yuan to other currencies in the zone,” said Sun Lijian, deputy director of the School of Economics at Fudan University.
There are similar plans afoot elsewhere. The manufacturing hub Shenzhen is building a “mini-Hong Kong” in Qianhai as part of plans to kick-start growth and ultimately to develop a financial market to rival London or New York.