The Qianhai new area's dream of becoming the "Manhattan of the Pearl River Delta" has been plunged into uncertainty since the casting of Shanghai in the leading role in the mainland's long-awaited reform of foreign exchange and interest rates.
Despite Qianhai's rapid progress in lining up Hong Kong banks to set up outlets and in cutting deals for cross-border yuan loans in the past few months, news of Shanghai's leading yuan business development role would inevitably cloud the Shenzhen zone's future, bankers and brokers said.
The central government has given in-principle agreement to Shanghai's new free-trade zone, to be launched this month, becoming the pioneer in the wider convertibility of the yuan and freer, market-oriented interest rates, according to Chinese-language documents obtained by the South China Morning Post last week.
Qianhai was one of the three pilot economic and services zones named by the State Council in December in the 12th five-year plan, with Qianhai to be positioned as a financial services hub and a yuan trade settlement centre.
Three banks from Hong Kong - HSBC, Hang Seng Bank and Bank of East Asia - received approval over the past few months to set up outlets in Shenzhen from which they will be able to serve companies in Qianhai.
This followed the granting of approval by the authorities to 15 banks in Hong Kong to offer a combined 2 billion yuan (HK$2.5 billion) in loans - the first yuan loans across the border - for firms to undertake construction in Qianhai.
More cross-border yuan loans are likely to be needed for the massive amount of construction that remains to be done in the zone, one reason banks are keen to have a presence there.
By May this year, cross-border loan demand from enterprises in Qianhai had reached 525 million yuan, according to Zhang Bei, the official in charge of Qianhai's development.
"We are ready and have the capability and resources to finance cross-border loans when the opportunity arises," said Tan Shiming, Citi's global yuan product manager.
The authorities are considering allowing private equity funds based in Qianhai to invest throughout the mainland, but no timetable has been announced.
International fund houses, such as Templeton Emerging Markets, said they would consider setting up offices in Qianhai, as did brokers, insurers and accounting firms. But for them to translate their interest into action, the special economic zone would have to lift some restrictions, some said.
The first issue is the geographical limitation on the scope of their Qianhai operations.
"We want to sell our fund products to the whole country, not just in Qianhai," Templeton Emerging Markets executive chairman Mark Mobius said.
Joseph Tong Tang, an executive director of brokerage firm Sun Hung Kai Financial, echoed this concern and raised others.
"Many brokers are eyeing setting up an office in Qianhai, but there are two big questions. First is whether the mainland authorities will allow Hong Kong-based brokers to set up there. The next question is what services we can offer there," Tong said. "If we can only do research or provide non-trading services in Qianhai, it is meaningless. If we can only serve clients based in Qianhai, it is also meaningless, as the 15 sq km area is too small. "
Christopher Cheung Wah-fung, the legislator representing financial services, said Beijing usually allowed only big players to enter the mainland markets.
"For Qianhai to be a real financial centre, it should also allow small and medium-sized brokers to set up there," he said.
Insurance legislator Chan Kin-por hoped Qianhai would reduce the capital requirement for Hong Kong-based insurers to set up office in the zone. "At present, the mainland requires foreign insurers to have at least US$5 billion in assets, which is too high for Hong Kong insurers," he said.
Hong Kong Institute of Certified Public Accountants president Susanna Chiu said while Qianhai stated it welcomed Hong Kong-based accountants, the eligibility hurdle was too high.
Qianhai requires Hong Kong-based accountants to have passed the mainland accounting qualification examination and have three years of working experience on the mainland.
Zhang, when asked if Qianhai might consider Hengqin - also in Guangdong - a rival, gave a firm no. He said the two zones would focus on different things. For example, Hengqin would be more about logistics. Qianhai is also expected to have closer ties with Hong Kong.