Shanghai to launch free trade zone September 29

[Eldorado]

Shanghai to launch free trade zone September 29 - paper

HONG KONG | Fri Sep 13, 2013 6:57am BST

(Reuters) - Shanghai will launch its trial free trade zone (FTZ) on September 29, featuring liberalized foreign exchange and interest rates in the form of new financial products, the Securities Times said on Friday, quoting a local official.

Product-led reform in the free trade zone may pour cold water on investor expectations of an overall relaxation of restrictions on the capital account in the FTZ.

"It is definitely not what analysts imagined if they thought a liberalized environment will be offered first to let corporates compete and develop there," Wang Xinkui, director of the city's Counselor's Office, said on the sidelines of an event held by OCBC Bank (China).

Wang said future reform in the free trade zone would likely produce a series of financial products. Once an innovation proved itself successful it could be more widely promoted in the zone.

Shanghai is pulling away as the clear winner in the race to set up free trade zones in mainland China, and a draft policy outlining reforms in the special zone is expected soon.

Beijing formally approved the establishment of a Shanghai FTZ in July and unconfirmed media reports have outlined initiatives targeting shipping, insurance, healthcare and auctions of "cultural relics", among others.

Wang warned, however, that if corporates went to the free trade zone only to pursue short-term profits it could fail.

The FTZ will open just before a week-long holiday that starts on Oct 1.

(Reporting by Michelle Chen; Editing by Anne Marie Roantree and Eric Meijer)

 

[Eldorado]

Sunday opening for Shanghai's free trade zone trial

Shanghai Daily, September 13, 2013

Shanghai's pilot free trade zone will officially open on Sunday, September 29 to allow financial product reforms involving free yuan convertibility under the capital account, liberal interest rates and foreign exchange, a city official said Thursday.

"The economic reforms propelled by the new central government will be first applied in the Shanghai FTZ trial, which is a national strategy," said Wang Xinkui, director of Shanghai's Counselor's Office, and director of the city's WTO Affairs Consultation Center.

Wang, who was involved in drawing up the draft plan for the trial, said reforms would be rolled out in a prudent way. "The details of the trial to be soon announced by the central government will not be the same as the market expected, that a fully open and free environment will be established due to the principal of prudent financial regulation."

He added: "Financial reforms will impose great risk to the existing system. The trial of reform in the FTZ will start with certain products involving capital account opening-up, and lifting restrictions on interest rates and foreign exchange quotas."

Wang believes the trial will benefit foreign banks that originate in free markets and are experienced in such products.

The model will be applicable across the Chinese mainland market if it is successful in Shanghai.

"The biggest strengths of the foreign lenders are risk-based pricing and risk management capabilities," said Pan Yingli, professor at the Antai College of Economics and Management, Shanghai Jiao Tong University. "At this stage, they have more advantages than the Chinese lenders in an environment with liberal interest rates."

Singapore-based OCBC bank and Hong Kong-based Bank of East Asia followed Western global banks including Citi and HSBC yesterday in expressing their interest in taking part in the free trade zone trial.

Samuel Nag Tsien, chief executive officer of OCBC, said the opening of the free trade zone was exciting news for the bank as the trial would bring opportunities for financial companies. The bank will try to seize the opportunity for sustainable growth in China, he said.

BEA said that it had formed a special work team to identify potential opportunities in the free trade zone and may establish a presence in the area.