Oct 01, 2013

    Shanghai FTZ expected to help, not hinder, HK

    THE launch of the Shanghai free-trade zone heralds a new chapter in China's drive to promote the yuan currency, but it is unlikely to pose a threat to Hong Kong any time soon, and could instead provide more opportunities for the former British colony.

    Underpinned by its strong rule of law and freedoms under the "one country, two systems" formula since it was handed back to China 16 years ago, Hong Kong is a long-time beneficiary of preferential economic policies.

    It is China's designated global offshore yuan centre and is seen as a gateway to the world's second-largest economy.

    While the launch of the 29 sq km Shanghai zone has stoked debate on whether this could be a turning point for Hong Kong's fortunes, market watchers expect little impact for now.

    "Shanghai's rise means that the international trading pie in the yuan only gets bigger, and Hong Kong's share will grow in absolute terms," said Mr Robert Minikin, a strategist at Standard Chartered Bank in Hong Kong.

    Officials at the launch of the zone on Sunday promised a much more open and streamlined environment for foreign firms to do business in China.

    However, the absence of senior Beijing leaders at the launch and few specifics on bolder reforms - such as a more convertible yuan and liberalised interest rates - left some disappointed, while officials stressed that the zone remains a work in progress.