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  • Sep 22, 2014
  • Updated: 5:03pm
BusinessBanking & Finance

Shanghai gets approval to set up free-trade zone

The area could also be used as a testing ground for major financial reforms

PUBLISHED : Thursday, 22 August, 2013, 7:39pm
UPDATED : Friday, 23 August, 2013, 3:40am

Shanghai has won approval from the State Council to set up the mainland's first free-trade zone, moving it closer to becoming a global financial, trade and shipping hub to rival other Asian cities such as Hong Kong.

The free-trade zone would also likely serve as a testing ground for the central government led by Premier Li Keqiang to launch major financial reforms as part of a plan to boost the service economy and cut reliance on exports.

Shanghai has its economic strength as well as geographical and political advantages in the greater China economic circle
Professor Liu Yuanchun from Renmin University

A general plan governing the operation of the free-trade zone that spans 28.78 square kilometres in Waigaoqiao, Yangshan and Pudong districts in Shanghai has yet to be released. Lawmakers needed to approve amendments to existing laws to legalise certain experiments, a statement posted on the Ministry of Commerce said yesterday.

"Shanghai has its economic strength as well as geographical and political advantages in the greater China economic circle," said Professor Liu Yuanchun from Renmin University.

"It's possible that as Shanghai's free-trade zone plan proceeds, Hong Kong's status as the region's financial centre might be weakened, but when that day may come is uncertain."

The statement did not give more details about the plan.

A free-trade zone, or free port, is where customs authorities allow the flow of goods unhindered with zero tariffs on imports.

Sources said earlier that Li aimed to allow foreign banks to set up subsidiary or joint-venture operations and give permission for foreign commodities exchanges to own warehouses in the free-trade zone.

Liu said Shanghai may change the mainland's yuan internationalisation course by luring business from Hong Kong, currently the country's major yuan offshore trading centre.

"The most valuable part of the Shanghai free-trade zone plan is in the financial sector, such as allowing individuals to directly invest into overseas capital markets," Liu said. "Without free cross-border capital flows, there's no way Shanghai can really emerge as a global financial centre."

 

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This article is now closed to comments

TNC2013
Great - a free trade zone in China. I hope it is a success - really.
However, will the financial institutions which set up shop there also be herded into a room like other foreign firms were recently and be sternly told by authorities that they should confess to their 'crimes' or else face fines that are double or triple the initial fines and also forget about hiring international lawyers to defend themselves against the accusations?
howyadoin
Shanghai can have a free trade zone but they still won't have strong rule of law. That takes decades to build and makes a world of difference.
Camel
Soon you can say to HK bye bye. If HK is going down economically I am sure, the loudest ones bashing against the Mainland will be the first ones who get on the planes and return to their sacred land of the "free".
 
 
 
 
 

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