Go with the flow – China to develop Shanghai’s free-trade zone and port at ‘orderly pace’

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Enthusiasm is creeping ahead of reality as Shanghai makes plans to further develop its free-trade zone into a Hong Kong-style free marketplace.

And while there is no concrete operating guide to work from, officials, researchers and company executives are in consensus that the city will need to expand the size of the free-trade zone, liberalise yuan capital accounts, loosen customs requirements and grant free visas to business travellers as it edges closer to becoming a global financial and shipping hub.

“A free-trade port can’t be built overnight,” said Chen Bo, a professor at the Huazhong University of Science and Technology. “The geographic size doesn’t appear to be a main concern since the central government will allow the free-trade zone to expand once the top officials are convinced of the merits of the policies.”

Two officials with the local port authority said a Hong Kong-style free market remained a far cry despite a step up in efforts by Shanghai to hone the image of its free-trade zone.

When the city launched the zone four years ago, local officials aimed to transform it into a mini Hong Kong, where businesses from around the world could freely conduct commodity trading and carry out investments without customs regulations and foreign exchange controls.

But the free-trade zone, the first of its kind on the mainland, failed to live up to expectations amid slow progress in liberalising the yuan and limited space for large-scale foreign businesses to set up their production facilities.

“The pace of conducting pilot reform measures on capital flows and financing should be accelerated to reinforce the development of the free-trade port,” said Liu Xuezhi, an analyst with the Bank of Communications. “The measures will be of great significance to the country’s further opening up.”

A free-trade port allows goods and capital to flow in and out freely, without import duties being charged. And except for businesses included in a “negative list”, all investments can be made in the zone without going through the government’s approval procedures.

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