Shanghai free-trade zone may just be the start of something bigger

PUBLISHED : Thursday, 05 September, 2013, 12:00am
UPDATED : Thursday, 05 September, 2013, 3:24am

The central government sees potential in greatly expanding the mainland's first free-trade zone over the next few years.

Late last month, Beijing gave final approval to the Shanghai free-trade zone, which will cover 28.78 square kilometres of the city's Pudong district. The Hong Kong-like zone will initially take in just a small part of Pudong, including the Waigaoqiao duty-free zone and Yangshan port.

The total area of Pudong district is 1,210 square kilometres.

Pudong is widely considered a major economic achievement of Deng Xiaoping , who personally endorsed the plan to launch the Pudong New Area in the early 1990s. It took about a decade to get Pudong ready as China's version of Wall Street.

Government sources familiar with the plan told the South China Morning Post that if the free-trade zone proves a success the government is likely to consider expanding it to the entire Pudong district, which covers the majority of the eastern part of the mainland's financial capital.

The sources, who declined to be named due to the political sensitivity of the matter, told the Post that some officials and scholars had discussed the possibility of making all of Pudong a new free-trade zone. But this idea was later put on hold due to concerns about how to control potential policy risks, which could come from opening financial sectors to foreign players.

The Post reported in July that Beijing would allow foreign banks to set up wholly owned units in the zone; mainland banks could offer offshore banking business; and foreign commodities exchanges and trading companies could own warehouses there. Some regulators were worried this could increase external financial risks that spread outside the zone.

The Post exclusively reported on Tuesday that the Shanghai free-trade zone will be launched on September 27, when central government officials will fly to the city to attend a ceremony to mark the occasion.