Shanghai FTZ’s third anniversary nothing to celebrate given slow progress on financial reform
Hopes for liberalising the capital account were hobbled by fears over loss of control, says expert
The Shanghai Free Trade Zone has failed to live up to the lofty expectations that came with its launch three years ago, with the disappointing progress shedding light on the difficulties of managing the world’s second-largest economy.
Thursday marks the third anniversary of what was once a pet project for Premier Li Keqiang, a project that fuelled hopes for liberalising the nation’s capital account, but any anniversary celebrations are likely to be low-key.
The central government’s sluggish pace towards freedom of capital movement has largely been due to fear of losing control of capital flows, said Zhao Xijun, a professor of finance with Renmin University. He added that the outlook for any bolder moves looked bleak.
In 2014 Zhao was a member of a team from the university that was invited by the National Development and Reform Commission to assess progress of the Shanghai FTZ.
“The fear of losing hold of capital movement was behind the caution,” Zhao said in an interview with the South China Morning Post.
When the Shanghai Free Trade Zone was set up in 2013 it raised eyebrows because of its plan to introduce a pilot scheme to gradually remove capital controls as a step towards a freely convertible yuan.