Opinion | Shanghai Free-Trade Zone struggles through birth

Shanghai Mayor Yang Xiong has been busy talking up the advantages his city can offer multinational companies as he seeks to build momentum for its free-trade zone. But delivering on pledges of creating an environment that facilitates investment smoothly may not be easy.

Yang told a clutch of top foreign company bosses at the end of last month that Shanghai was pushing ahead with steps to create a more investor-friendly environment, in line with the city's ambition of transforming itself into a global financial and shipping centre.

The city's newly launched free-trade zone, seen as a test bed for further economic reforms, is expected to add to the lustre of the metropolis already generally known as a key gateway for foreign investors to the world's most populous country.

However, it remains to be seen how far the city can succeed in removing stubborn hurdles, including red tape and rising costs, to make it easier for multinationals to set up operations.

Mainland policies on market liberalisations and reforms remain the domain of the State Council and the central government ministries. Many of Shanghai's efforts to attract foreign capital and talent do not get anywhere without a nod from Beijing.

This was illustrated when the city sought to cut the personal income tax. Residents who earn about 100,000 yuan a month pay about 30 per cent income tax, nearly double the rate in Hong Kong. But state tax authorities killed Shanghai's plan.