Shanghai sees global status via new free-trade zone

Shanghai officials are banking on its role as the mainland’s first free-trade zone to put the city among the world’s top financial centres.

Under the plan, endorsed by the State Council on Wednesday, Shanghai is expected to allow companies to freely convert foreign exchange within specified areas of the city while allowing free capital and commodity inflow for the entire city.

Mayor Yang Xiong, said Shanghai’s future hinged on the free trade zone, which could give the city a leg-up over rivals.

Yang Jianwen, a researcher at the Shanghai Academy of Social Sciences, said: “The free-trade zone could result in tremendous changes in the Asia-Pacific trade and finance sectors. Shanghai officials are taking a long view and have started drawing up a blueprint for the city’s development between 2014 and 2049.”

Shanghai’s ambitions to become the nation’s economic engine, leapfrogging Hong Kong as the dominant financial hub in the region are an open secret. The long-awaited policy incentive granted by the cabinet will only add heft to the city’s attempts to attract global capital and talent.

Shanghai will first upgrade and expand the existing “bonded” areas, where foreign merchandise can be brought in without import duty for the purpose of reprocessing, at Yangshan deepwater port, Waigaoqiao port and Pudong airport, to facilitate commodity and capital flows.

Qu Hongbin, the chief China economist at HSBC, said the trade volume at the Shanghai bonded zones were valued at more than US$100 billion last year, representing 3 per cent of the mainland’s total trade value.