Shanghai's neighbours look for upside to free-trade zone

Public talk of regional co-operation belies unease about outflow of capital

PUBLISHED : Saturday, 21 December, 2013, 4:59am
UPDATED : Saturday, 21 December, 2013, 7:22am

What's in it for me? That must be the question foremost on the minds of Zhejiang and Jiangsu officials when asked about the Shanghai free-trade zone.

The eastern metropolis became the envy of the nation when the State Council gave it the go-ahead in July to develop the mainland's first-ever Hong Kong-style free port, a test bed for further dramatic reforms.

The free-trade zone, albeit without expected details on how the yuan would be made fully convertible within its bounds, weighed on other government officials in the Yangtze River Delta who believed the central government did not do right by them.

The groundbreaking zone would strengthen Shanghai's role as the economic engine of the delta at the expense of its neighbours. Over the past decade, Jiangsu and Zhejiang have been locked in a fierce battle with Shanghai to lure investment from elsewhere in the country and overseas.

During a seminar earlier this year in Hangzhou , the provincial capital of Zhejiang, local officials expressed their concern that establishing the Shanghai zone might cause capital flight to the national financial centre.

Not surprisingly, Shanghai leaders have done everything they can to ease any fears among their delta counterparts, including holding face-to-face talks. On Wednesday, top bosses from Anhui , Jiangsu, Shanghai and Zhejiang gathered in Nanjing to discuss a joint development plan for the delta economy.

Officials in attendance, including Shanghai Communist Party boss Han Zheng , agreed to "join hands" while drawing up a pilot scheme for the free-trade zone and share the benefits from any future reforms. More importantly, they reached a consensus to accelerate efforts to help expand the free-trade zone to other qualified areas in the delta.

The officials said the zone, which is aimed at facilitating cross-border capital and cargo flows, would create cascading demands for Chinese-made products and services, and benefit the regional economy.

Shanghai has largely relaxed customs intervention in the zone to quicken the pace of cargo flows and encourage manufacturers to set up their production facilities within its bounds.

In light of their consensus, Shanghai and its neighbouring provinces will collaborate on efforts to streamline customs procedures and strengthen imports and exports.

Although the agreement did not say so, it is understood that some of the cargo imported to or exported from other parts of the delta via the deep-water Yangshan Port located off Pudong would receive the same treatment from local customs authorities as that moving within the zone.

Shanghai has reasons to extend an olive branch to its neighbours - goods arriving from or destined for other parts of the delta accounted for nearly half of Shanghai's total cargo volume.

But the "joint efforts" on the free-trade zone are only an ad hoc part of the policy.

The central government plans to create similar trade zones in other parts of the country in two or three years. One or two of the bustling port cities in Zhejiang and Jiangsu would certainly be among the top beneficiaries of any expansion of the policy.

Regional governments will state for the record that competition between them is healthy and their blueprints for building "centres" of all kinds - financial centres, shipping centres and production centres - complement each other.

In private, however, they will likely admit that their ambitious plans result in see-saw battles, not win-win scenarios.