Industry insiders view Shanghai port plan to rival Hong Kong as unrealistic

Shanghai is drawing up a proposal to replicate Hong Kong’s success

PUBLISHED : Monday, 13 November, 2017, 8:52pm
UPDATED : Monday, 13 November, 2017, 11:29pm

Vice-Premier Wang Yang has thrown his name behind a plan to transform key mainland ports including Shanghai into free-trade hubs on par with those in Hong Kong and Singapore, but some industry insiders warn the vision is overly ambitious.

The free-trade ports would be positioned as “highlands with stronger radiation effects”, Wang wrote in the Communist Party mouthpiece People’s Daily. He compared them to Hong Kong, Singapore, Rotterdam and Dubai but did not elaborate on the strategies or policies needed to bring about the transformation.

Wang’s voice of support comes less than a month after he was appointed to the Politburo Standing Committee at the national congress in Beijing.

President Xi Jinping, in his address to the assembled delegates, said the mainland’s 11 free-trade zones would explore ways to build free-trade ports.

Shanghai established the mainland’s first free-trade zone in 2013 as a testing ground for further reforms. But the area, now covering more than 120 sq km, failed to attract much foreign funds or business because of a lack of liberalisation.

The municipal government is now drawing up a detailed proposal to build a Hong Kong-style free-trade territory with little intervention from customs and other authorities, according to local government officials.

The proposal is seen as Shanghai’s wish list to the central government, but it could get a big push from newly appointed city party boss Li Qiang, Xi’s former top aide during his tenure in Zhejiang province.

But some industry officials have said putting Shanghai on the level of Hong Kong was a pipe dream unless accompanied by concrete policy breakthroughs and a deep change in thinking.

Shanghai would have to expand the size of its free-trade zone, liberalise the capital account and issue free visas to foreigners. “The local bureaucracy is not optimistic about the prospect,” warned an official with the city’s port authority, who wished to remain anonymous.

“The infrastructure is ready, but the whole system, all the way from customs, financial and industry regulations to people’s mindsets, is far from being ready.”

A Hong Kong-like regulatory framework could result in unexpected market chaos, the official said.

Chen Guo, the chief strategist at investment consultancy Essence Securities, was more optimistic. “We expect the free-trade zone in Shanghai to be a counterpart of Hong Kong and Singapore, [and] whose openness will be in line with the highest international practices,” Chen said. “Shanghai’s free-trade port will learn from Hong Kong and Singapore to be a true marketplace for offshore trade and offshore finance.”

If the government grants more freedom to the ports in Shanghai, Zhejiang and Guangdong, they could threaten Hong Kong’s traditional role as the entry point to the Chinese market.

According to the Hong Kong government, around 40 per cent of China’s foreign trade goes through the city.