Shanghai free-trade zone
Shanghai free-trade zone (FTZ) is the first Hong Kong-like free trade area in mainland China. The plan was first announced by the government in July and it was personally endorsed by Premier Li Keqiang who said he wanted to make the zone a snapshot of how China can upgrade its economic structure. Other mainland cities and provinces including Tianjin and Guangdong have also lobbied Beijing for such approvals. The Shanghai FTZ will first span 28.78 square kilometres in the city's Pudong New Area, including the Waigaoqiao duty-free zone and Yangshan port and it is believed it may eventually expand to cover the entire Pudong district which covers 1,210.4 sq km of land.
HSBC and Standard Chartered among first Shanghai free-trade zone banks
Lenders are expected to be among the first foreign banks to offer more yuan services as part of Beijing's plan to open up Shanghai
HSBC and Standard Chartered are expected to be among the first batch of foreign banks to offer a wide range of banking services in the mainland's first free-trade zone, in Shanghai, with Beijing wanting to open its financial sector wider to foreign investment.
Sources familiar with the situation said the China Banking Regulatory Commission's (CBRC) Shanghai bureau had contacted a small number of foreign banks, including HSBC and Standard Chartered, to seek feedback on how they wanted to open business in the free-trade zone, due to be launched on September 27.
The two foreign banks have conducted business in China for more than a century and Beijing often selects them to take part in innovations, particularly in recent years those related to yuan business, with the central government keen to make its currency more global.
Raymond Yeung, an economist at ANZ Banking in Hong Kong, said Shanghai was the mainland's financial centre and the free-trade zone would allow the two banks to "operate under a less-restricted or free market, just like Hong Kong".
"The tremendous business opportunity could help the business expansion of foreign banks on the mainland," he said.
A Standard Chartered spokeswoman said the bank was committed to contributing to the further development of the zone, but declined to comment on regulatory approval or other decisions. An HSBC spokeswoman also declined to comment.
The CBRC had sought feedback from banks in recent months, a Shanghai-based senior executive at a foreign bank said. "But banks are quite reluctant to invest a large sum of money in the zone, as details are still unclear and foreign banks as a whole are not making very good profits on the mainland," he added.
A Bank of East Asia (BEA) spokeswoman said it would consider establishing a presence in the zone, depending on regulatory conditions.
HSBC, Standard Chartered and BEA set up wholly owned, locally incorporated units on the mainland in 2007, when Beijing encouraged major foreign banks to do so to provide local yuan-banking business to mainland residents. They each put eight billion yuan of initial registered capital into their Shanghai units.
In July, the South China Morning Post reported that Beijing would allow foreign banks to set up wholly owned subsidiaries in the new zone. The move could cut years from the time foreign banks must otherwise spend before opening branches or subsidiaries on the mainland.
Beijing is expected to allow all lenders in the free-trade zone to provide unrestricted banking services similar to the offshore yuan trading offered by HSBC, Standard Chartered and other banks in Hong Kong, which are already popular with corporate and individual clients. "Dim sum" bonds, loans and foreign exchange trading are expected to be included.
The free-trade-zone plan is a concern for many Hong Kong officials and bankers, with some worrying the city's position as an offshore yuan-trading centre and its financial industry might be threatened by Shanghai's rise.