Shanghai is offering cash subsidies of up to US$8.46 million to financial institutions that set up branches in the new part of its expanded free-trade zone, as the city strives to create a buzzing free-market hub to rival Hong Kong. The municipality announced on Friday that banks, insurers, brokerages, fund managers, trust firms and financial leasing companies would receive up to 60 million yuan (US$8.46 million) worth of subsidies to buy office properties in Lingang. Financial firms renting offices for their Lingang operations will be granted subsidies that cover their first three years of rent. “We think preferential policies are needed to promptly attract a group of financial institutions to land in Lingang,” said Wu Wei, a deputy director of the Lingang FTZ administration commission. “We hope financial institutions will play a leading role in developing the zone and supporting business activities.” Shanghai doubled the size of its FTZ last month to about 240 square kilometres by including part of Lingang, a previously untapped area linked to the Yangshan deep water port. The geographic expansion of the Shanghai FTZ after six years of underwhelming development reflects the city’s ambitions of creating a free marketplace on par with Hong Kong, where greater freedom will be granted to cross-border capital and cargo flows. The street protests that have rattled Hong Kong, causing hotel occupancy, retail sales and property prices to plunge, have brought opportunity to mainland cities such as Shanghai and Shenzhen. Wu said other incentives aimed at boosting Shanghai’s prospects were also in the works, subject to approval by ministry-level authorities in Beijing. It is widely expected that goods imported into the Lingang FTZ will face zero tariffs, a significant step for Shanghai bringing it in line with global gateway cities such as Hong Kong, Singapore and Dubai. Government sources said the policies were prepared by the General Administration of Customs, but it is not known when they will be officially announced. Lingang’s inclusion in Free-Trade Zone a chance for Beijing to conduct bold reform The expansion of FTZ into Lingang was carried out under the direction of President Xi Jinping, as a way of further opening up the Chinese economy to the world as it struggles under the wight of the grinding trade war. Shanghai established the FTZ – mainland China’s first – in 2013 with the aim of spearheading economic reform and financial liberalisation. But it has yet to live up to its promise, which included making the yuan fully convertible under capital accounts and allowing free cross-border cargo flows without any customs intervention. Among the first batch of institutions that signed pacts with the Lingang FTZ administration on Friday were the mainland’s largest five banks including Industrial and Commercial Bank of China. But not a single foreign institutions was among them.