Shanghai free-trade zone

Shanghai to expand access to overseas funding for companies as part of plan for free port

City’s mayor says more companies operating outside its free-trade zone will be able to use special bank accounts as it awaits endorsement of an expansion plan

PUBLISHED : Tuesday, 30 January, 2018, 7:02am
UPDATED : Tuesday, 30 January, 2018, 7:48am

Shanghai plans to make it easier for more companies based outside its free-trade zone to raise capital from outside mainland China as it seeks government endorsement for plans to expand the zone into what it calls a free-trade port.

Mayor Ying Yong told reporters on Monday that such companies would be allowed to use the so-called FT bank accounts currently available to companies within the 120 square kilometre (46 square mile) free-trade zone.

“Shanghai will expand the scope to allow more businesses to use FT accounts,” he said at a media conference after the close of the annual session of the Shanghai People’s Congress. “Regarding the free-trade port issue, Shanghai will build it under the direction of the central government, which is making overall arrangements.”

He did not elaborate on what kind of businesses outside the zone would be allowed to set up FT accounts.

His remarks came after the state-owned Shanghai Securities News reported that a detailed operating plan for the free-trade port would be unveiled after the close of the National People’s Congress annual session in March.

The free-trade port is an upgraded version of the free-trade zone, and will offer further financial liberalisation as Beijing looks to create international free trading hubs on a par with Singapore and Hong Kong.

Shanghai edges closer to building a Hong Kong-style free port as it mulls experimental reforms

Shanghai has submitted a “wish list” to the State Council, China’s cabinet, containing its proposed policy changes to develop the free-trade zone – launched in late 2012 – into a free port where cross-border funding and commodity flows are allowed.

Chen Bo, a professor at the Huazhong University of Science and Technology and adviser to local governments including Shanghai’s, said the wish list included the liberalisation of yuan’s capital account, loosened customs oversight and the geographic expansion of the zone.

Earlier this month, China’s commerce minister, Zhong Shan, said greater freedom should be given to local governments in running free-trade zones, which would eventually be developed into free-trade ports.

China’s commerce minister backs plan for free-trade ports to further economy’s opening-up

FT accounts were seen as a preliminary step in liberalising the capital account, and were first introduced to the free-trade zone in Shanghai three years ago. Companies can use the accounts, which are considered offshore accounts for official purposes – to borrow funds outside mainland China, where interest rates can be lower. Banking authorities allow free capital flows through FT accounts.

Last year, Shanghai allowed selected technology firms based outside the zone to set up FT accounts.

Go with the flow – China to develop Shanghai’s free-trade zone and port at ‘orderly pace’

About 70,000 businesses now have FT accounts in Shanghai, and have raised a combined 1.1 trillion yuan (US$173.9 billion) through overseas financing, the mayor said. 

He had said last week that Shanghai would earmark an area for stress tests as part of the plans to develop the free-trade port.