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The entrance to the Shanghai free-trade zone. Similar zones are earmarked for Guangdong, Fujian and Tianjin. Photo: Reuters

Other cities to enjoy certain practices of Shanghai free-trade zone, cabinet says

Experience from city should be copied sooner rather than later, says cabinet

The State Council yesterday published a list of Shanghai free-trade zone (FTZ) policies that could be replicated in other parts of the mainland in an attempt to accelerate liberalising the capital account of the yuan and drastically lifting restrictions on foreign investments.

The cabinet announced on its website that experiences garnered by the FTZ should be copied across the nation sooner rather than later. These included simplified approval procedures for overseas investments, loosened regulations on cross-border cargo flows, further eased conversions between yuan and foreign currencies, widened access for foreign service firms to the mainland market, and a bigger role for market forces.

"The announcement appeared to be a general guideline without detailed measures on how and where to expand the Shanghai policies," said Professor Zhao Xiaolei, head of Shanghai University of Finance and Economics' FTZ research institute. "It is highly expected a fresh round of efforts to bolster FTZ developments will roll out soon."

In late October, President Xi Jinping likened the Shanghai FTZ to "seeds" of economic reforms, while urging policymakers to expand the pilot scheme nationwide.

At the end of last year, the State Council approved three new FTZs in Fujian , Tianjin and Guangdong, while endorsing Shanghai's plan to more than quadruple the geographic size of its zone to 120.7 sq km. After the expansion, it would include the high-profile Lujiazui finance trade zone, dubbed China's Wall Street.

The inclusion of Lujiazui in the FTZ heightened speculation that full convertibility of the yuan was near as Beijing took a substantial step forward in facilitating cross-border investments.

When the Shanghai FTZ was inaugurated in September 2013, the state financial authorities pledged to make the yuan convertible under the capital account in the zone, which could bolster fixed-asset investments by foreign investors, attract an influx of overseas funds to the mainland capital and property markets, and benefit Chinese investors' efforts to buy foreign assets, stocks and property.

The Shanghai FTZ has yet to implement the liberalisation, with foreign and domestic businesses unhappy at the lack of transparency and clarity of policies linked to its development.

The Shanghai FTZ "put Shanghai in the host seat when pushing for nationwide reforms", said Stefan Sack, chairman of the European Union Chamber of Commerce in Shanghai. "However, the announcement that a total of three new zones would be established has somewhat subdued initial enthusiasm."

Zhao said the Shanghai FTZ policies would be expanded not only to the newly endorsed FTZs, but also to other areas as Beijing was adamant about cutting red tape and drawing overseas funds to help mainland products move up the value chain.

A Tianjin government official said its FTZ would initially focus on leasing ships and aircraft to avoid direct competition with Shanghai.

 

This article appeared in the South China Morning Post print edition as: Shanghai FTZ rules to spread nationwide
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