Foreign firms shun Shanghai zone

The much-trumpeted mini-Hong Kong has turned out to be a damp squib as foreign businesses seem to give the Shanghai free-trade zone the cold shoulder for its lack of specifics.

Fewer than 3 per cent of the firms that had registered at the zone since its opening in late September were foreign-funded, the Shanghai government said.

This lack of interest for an initiative that was touted to become the mainland's new growth engine and aimed to give companies a free rein in a tightly regulated economy has left Shanghai officials red-faced.

"I wouldn't think the lukewarm response from multinational firms is a result of their disappointment," said Ai Baojun, a Shanghai vice-mayor who is also head of the zone's administrative committee. "They expect us to unveil the details soon."

After a lot of internal resistance, the central government had endorsed Shanghai's ambition of developing the Hong Kong-type territory in which officials had envisioned freer cross-border capital and commodity flows that would help the mainland further integrate with the global economy.

Beijing had pledged to make the yuan fully convertible in the zone but has yet to map out a detailed plan.

The ultimate goal is to attract global talent and funds to help the mainland strengthen its economic might while replicating the Shanghai free-trade-zone model in other parts of the country.