China economy

Shanghai free-trade zone edges closer

Approval expected soon for plan that ties in with move for full yuan convertibility

PUBLISHED : Friday, 07 June, 2013, 12:00am
UPDATED : Monday, 30 May, 2016, 5:01pm


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Shanghai is expected to launch the mainland's first free-trade zone soon, reinforcing the city's bid to become a global financial centre.

The proposals on the free-trade zone were being reviewed by the relevant ministry-level authorities in Beijing and were likely to receive the go-ahead as early as July, the state-owned Shanghai Securities News reported.

The mainland's commercial hub, aiming to create a new growth engine, announced in January that it would build a free-trade zone, also known as a free port, to facilitate cross-border commodity and capital flows.

It was expected that the plan could be implemented this year.

In a free-trade zone, goods can be imported, processed and re-exported without the intervention of customs authorities, hence the free flow of the commodities and capital.

The newspaper said Beijing would allow full convertibility of the yuan in the pending free-trade zone, a move to help Shanghai fast-track transforming itself into an international financial centre.

Though Shanghai's ambitions as a financial centre were endorsed by the State Council in 2009, no major liberalisations have been conducted amid a cautious stance taken by the national banking and securities regulators.

Shanghai has been under pressure to liberalise financial markets and bolster cross-border trade after the city became one of the slowest-growing provincial regions across the mainland.

It also faces competition from Qianhai, an experimental financial zone in Shenzhen that is being used as a testing ground for freer yuan usage and capital account convertibility.

The launch of a free-trade zone in Shanghai will be in line with Beijing's efforts to make an operational plan for the full convertibility of the yuan before the end of the year.

It is expected that Beijing would liberalise the capital account by 2015, which would allow businesses or individuals at home and abroad to freely convert their currencies to buy assets and equities across the border.

Economists said a free-trade zone in Shanghai could be used as a testing ground for the yuan's full convertibility. The free-trade zone in Shanghai could also help the mainland city dent Hong Kong's role as an established financial, trading and shipping centre in the region.