The shanghai free trade zone interest

This new policy permits foreigners to engage in the e-commerce business in China without having to joint venture with a Chinese partner. Transaction processing services are further defined as a variety of banking services, stock trading, ticket transactions, sale of auction goods, electronic payments, etc. Based on this definition, the services provided by various well-known e-commerce operators, such as Taobao. The FTZ New Policy enables foreign investors to establish a percent foreign-owned company without joining with a Chinese partner.

The shanghai free trade zone interest

Shanghai Free Trade Zone: More than 20 years later, the reforms launched by Deng and his followers have transformed China into a booming market economy.

The square kilometer China Shanghai Pilot Free Trade Zone Shanghai FTZ was formally launched on September 29, and a first batch of 25 Chinese and foreign companies have already been granted licenses to register in the zone.

But much about how the zone will operate remains unclear. The shanghai free trade zone interest opinions subsequently swung toward the pessimistic as the government released a long list of prohibited activities for foreign companies in the zone.

The shanghai free trade zone interest

The reality is somewhere in between. In an editorial in Financial Times, Li called for increasing the role of the private sector to sustain growth.

The Chinese University of Hong Kong

Chen LongProfessor of Finance at the Cheung Kong Graduate School of Business, says falling returns on investment, inadequate funding for small and medium sized companies, and extremely high grey market interest rates have all convinced the government that it needs to reform.

Chen identifies three major areas of reform that authorities have pledged to carry out in the zone. First, the government plans to reshape the investment environment.

Thirdly, in order to bring the investment environment up to international standards, the government has to redefine its role in the economy, Chen says. Policies state that the zone will standardize regulatory and administrative treatment for all firms, essentially leveling the playing field for state-owned, private and foreign companies.

When the Shanghai zone was initially approved in July, it was meant to be a low tariff zone for trade and shipping. Joining international investment agreements means China must abide by international standards, which includes greatly curtailing the role of the government and carrying out significant domestic reforms with regards to intellectual property rights, state-owned companies, and investment.

Announcements that the zone will not offer lower corporate tax rates, relax restrictions on foreign ownership of banks, or liberalize interest or exchange rates anytime soon have led many to curtail their expectations.

Another factor that may limit the scope of reform is the stated requirement that the changes in the zone be replicable elsewhere in the country, writes Ting Lu, China Economist for Bank of America Merrill Lynch, in a note.

Finally, some analysts say that financial regulators fear that liberalizing exchange and interest rates in the zone, but not elsewhere in China, would create tremendous incentives for people to make money through arbitrage and create risk for the financial system, says Wang of Capital Economics.

They weigh that very concrete fear against the broader, more diffuse benefit of a more balanced economic model, and the more concentrated fear of a financial crisis wins out. Click to enlarge History Lessons Wang of UBS argues that reforms to open the services sector and streamline government administration and supervision will be the most influential, since they are easiest to expand nationwide.

Among other reforms, the zone will also promote cross-border financing in renminbi and foreign currencies and allow foreign financial institutions in the zone to borrow renminbi from overseas.

Money will be allowed to flow relatively freely between the zone and the outside world.

The shanghai free trade zone interest

However, the central bank will set up special accounts in the zone that it can monitor to control flows to the mainland. When it comes to setting up such a firewall, regulators face a tricky dilemma, says Wang of Capital Economics.

A lack of an adequate firewall may lead to destabilizing capital flows. But if they strictly control capital flows, the impact of reforms in the zone could be limited—as the example of Qianhai, set up indemonstrates.

Chinese companies in the zone would be allowed to receive renminbi loans from Hong Kong banks, while local private equity funds could raise renminbi capital from Hong Kong investors.

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Today, these trades are taking place, but their scale has been much more limited than anticipated. One major reason is that authorities set up extremely tight firewalls between Qianhai and the rest of the mainland, such that renminbi flowing in from Hong Kong can still only be used for investment within Qianhai itself.

But the whole value of the zone is how much they let things spill out of it. Analysts are quick to point out that the Shanghai zone is happening on a much larger scale and with much stronger backing than Qianhai.

Support at the central level is essential for implementing dramatic reforms, especially in the financial sector, says Wang of Capital Economics. And the Shanghai zone has already developed much more quickly than Qianhai did, with regulators in charge of securities, banking, insurance and industry all releasing relevant guidelines: Qianhai is one thing, but those who expect the Shanghai zone to compete with Hong Kong or rapidly lead to comprehensive national reforms need to curb their enthusiasm, argues Lu of Merrill Lynch.

Hong Kong still benefits from transparency, the rule of law, low income taxes, and a long history and strong reputation as a financial center.Mar 26,  · A Free Trade Zone or Area is an region where there are no tariffs or tax restrictions on supply of goods and services, it is essentially an area that is economically integrated.

A confluence of regional and international factors makes the 18 th summit meeting of the Shanghai Cooperation Organization (SCO) this weekend in Qingdao an event of special interest. The summit has an added meaning insofar as for the first time the two newly inducted member states India and Pakistan will be taking their place at the high table.

Shanghai Free Trade Pilot Zone is applying for RMB capital account openness, and this reform will not change with the change of short-term liquidity, hot money flows. Sep 30,  · China launched its new free-trade zone in Shanghai on Sunday. China cut the ribbon on its new free trade zone in Shanghai on Sunday, with the government promising to .

Join the Nasdaq Community today and get free, instant access to portfolios, stock ratings, real-time alerts, and more! Market-set interest rates, seen by analysts as a key reform for China's economy, will also be trialled, according to the statement.

But he added that "a free trade zone in Shanghai alone will.

Shanghai summit: Is it really a suitcase without a handle? | Asia Times