China launches free trade zone in Shanghai

china-launches-first-free-trade-zone

China launched a free trade zone in its commercial hub Shanghai on Sunday, state-media reported, with the project seen as a testing ground for much-needed reforms in the world’s second largest economy.

The zone, which covers 29 square kilometres (11 square miles), “started operating on Sunday”, the official Xinhua news agency said, adding that it was “a test bed for the Chinese leadership’s drive of deepening market-oriented reforms and boosting economic vigour”.

Reforms in the zone will be closely-watched as a key test of China’s ability to make long-pledged structural changes as it attempts to shift its economic model in the face of slowing growth.

The government will allow free yuan convertibility under the capital account on a trial basis, according to a statement released by China’s State Council cabinet on Friday.

Market-set interest rates, seen by analysts as a key reform for China’s economy, will also be trialled, according to the statement.

Restrictions on foreign investment will be eased inside the area, which will also loosen controls on 18 service sectors ranging from finance and shipping to culture services.

Excitement over the launch has boosted stocks of Shanghai-based firms and spurred a rally in home prices and land costs in areas neighbouring the zone in the past few weeks, state media have reported.

But analysts interviewed by AFP adopted a cautious approach.

“It shows that the new government is keen on making reforms,” said Stefan Sack, vice president of the European Chamber of Commerce in China.

“We have to see what kind of regulations will really be implemented there.”

But he added that “a free trade zone in Shanghai alone will not change how business is done in China”.

Unlike with previous special economic zones launched by China’s government, the Shanghai free trade zone’s (FTZ) emphasis on the service sector, rather than export-oriented manufacturing, has been welcomed by economists.

China’s government has been struggling to shift the domestic economy away from dependence on big-ticket investments and more towards consumer demand as the key growth engine.

President of the US chamber of Commerce in Shanghai Kenneth Jarrett said the zone’s plan showed a clear emphasis on service sectors.

“It suggests that the government does plan to have the service sector as a major component of what the FTZ will do,” he said.

“Our members are eager to find out more. But there is a sense that the zone could offer real opportunities for our member companies.”

The project has been pushed by China’s Premier Li Keqiang, who took office in March, and hopes it will set a model for future reforms to be carried out nationwide, analysts and government officials have said.

A plenum of the ruling Communist party, scheduled for November is expected to announce nationwide economic reforms.

But analysts say major changes are likely to be cautious and subject to lobbying from interest groups which benefit from China’s current economic model.

“Li Keqiang… seems to be associating his office and his own reputation with this initiative, which is why people are taking it as the first indication as we get close to the plenum of what the economic reform agenda will look like,” Jarrett said.

China’s economy, the world’s second largest, expanded 7.7 per cent in 2012, its slowest pace in 13 years. Growth stood at 7.7 per cent in the first three months of this year and slowed further to 7.5 per cent in the April-June period.

 

 

Source : Channel News Asia | September 29, 2013

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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