Opinion | Banks take lead in fulfilling Qianhai's Manhattan dream

After many years of talk, the long-awaited Qianhai special zone finally kicked off last week. As part of the project, 15 banks in Hong Kong will be allowed to offer a combined two billion yuan (HK$2.46 billion) in loans to companies in the zone next to Shenzhen.

This, however, is only a baby step and it will be a very long way before the mainland government's dream to turn Qianhai into the "Manhattan of the Pearl River Delta" is achieved.

Hong Kong lenders and brokers have taken the Qianhai project seriously as the reclaimed area west of Shenzhen is only one hour by car from Hong Kong. All eyes will be on any special policies in the zone that can benefit local financial firms.

Previous projects floated for Qianhai, such as developing as an insurance hub or launching a new exchange, have proven to be empty talk only as they were rejected by Beijing.

The National Development and Reform Commission in June finally confirmed the zone would be a testing ground for the introduction of freer convertibility of the yuan. The mainland government still has capital controls, which mean that all funds transferred in or out of the country need approval.

Freer convertibility of the yuan, some brokers speculate, may allow people in Qianhai to invest in the Hong Kong stock market directly, while some insurers would like to see if they can sell Hong Kong policies there. A broker association will submit a report to Qianhai next month outlining these opportunities.

Banks have taken the lead so far. Allowing 15 banks to lend to Qianhai companies last week was a breakthrough as this is the first time Hong Kong lenders have been allowed to do cross-border yuan loans.