Shanghai free-trade zone launched
CHINESE officials inaugurated Shanghai's new free-trade zone yesterday as the country looks to experiment with loosened capital controls and other reforms to sustain growth.
Important tasks for the zone include deepening financial-sector innovation and a liberalised service sector, Commerce Minister Gao Hucheng said. The city government should establish an "efficient, safe, and open economic system" in the zone, he added.
The area is a testing ground for free-market policies that Premier Li Keqiang has signalled he may later implement more broadly throughout the world's second-largest economy. The initiative pushes forward a goal of making Shanghai a world financial centre by 2020.
Bank of China and Bank of Communications said they got regulatory approval to set up branches in the zone, as did Citibank China. A total of eight domestic banks and two foreign ones were given licences to operate there, the Oriental Morning Post reported on its verified microblog account yesterday.
An additional 25 companies, including units of Porsche and SAIC Motor and a trading unit of BNP Paribas, were also those granted licences, the Morning Post said.
China will allow trials of yuan convertibility in capital flows in the zone, as long as risks are controlled, the State Council said in a statement on Friday. It didn't elaborate on how the currency would be more easily exchanged for others.
Mr Li mentioned the free-trade area in a commentary earlier this month for the Financial Times newspaper. He wrote that China would continue to streamline government and delegate power.
"We will explore new ways to open China to the outside world, and Shanghai's pilot free-trade zone is a case in point," he wrote.
Eighteen service industries will be liberalised, including banking and shipping, with foreign financial institutions allowed to team up with private-capital partners in China to set up joint-venture banks, the nation's top decision-making body said.
Wholly foreign-owned shipping-management companies will also be permitted, it said.
HSBC Holdings analysts said in a Sept 6 note that planned policies for the Shanghai zone would make it the "primary test ground of financial reform and innovation". The success of the area, "in turn, would provide renewed impetus driving forward China's ongoing financial reforms", economists Ma Xiaoping and Qu Hongbin wrote.
Officials have been considering the Shanghai policies ahead of a Communist Party meeting in November due to expand on the leadership's plans for reducing the government's hand in the economy and financial system. Mr Li has called for the state to increase the role of the private sector in sustaining growth.