Shanghai Free Trade Zone details to be delayed

Shanghai Free Trade Zone details to be delayed

Updated: 2013-09-17 23:48

By WEI TIAN in Shanghai ( China Daily)It could be months before reform guidelines are put into effect

The Shanghai Free Trade Zone will be officially launched later this month but investors mayhave to wait for another couple of months before detailed reform guidelines are released,according to experts close to the matter.

Kuai Zhenxian, chief economist with Shanghai Waigaoqiao Free Trade Zone Development Co,said at a conference in Shanghai on Tuesday that the much-expected zone would be officiallylaunched on Sept 29.

The 17-square-kilometer Waigaoqiao area is the largest component of the 28 sqm km FTZ andwill be a major carrier of the pilot reform. It will carry the same expectations as China’s firstopening-up and reforms in late 1970s and when the country joined the World TradeOrganization in 2001.

The State Council, China’s cabinet, officially approved the establishment of the Shanghai FTZin August after the plan was passed by top decision-makers in July.

Shen Danyang, a spokesman with the Ministry of Commerce, confirmed with reporters in Beijingon Tuesday that the legislators have given the green light for a proposal to suspend certainlaws in relation to foreign investors in the FTZ for three years to remove investment barriersand reduce approval procedures. The decision will take effect from Oct 1.

However, Kuai said, details of the reform guidelines in the FTZ would not come along with theofficial launch of the FTZ at the end of September but will be gradually released before the endof this year and into next year.

Chen Bo, an expert on the FTZ with Shanghai University of Finance and Economics, said thedetailed plans will involve 98 pilot programs, which will be divided into two parts.

“The first part will not have much content about financial reform,” Chen said.

In the meantime, another preparatory measure of the FTZ has also met with resistance.

As requested by the State Council, the FTZ will explore a “negative list” management approach,which will outline restricted sectors. Any sectors not on the list will be free for entry.

According to Kuai and Chen, there are already more than 10,000 items on the negative list,which means more than 10,000 restricted areas. “It will be meaningless to have so many itemson the list,” Kuai said, while Chen said that the approach need to be reconsidered and mightnot even be published soon either.

Vivian Jiang, a tax and legal business partner with Delloitte Touche Tohmatsu, estimated thatan all-round rollout of reform in the FTZ may come out some time in 2014, after legislation workin the area is complete.

She pointed out that the key to the successful operation of a FTZ will depend on a soundcommunication and coordination among central government, local government and enterprises.It is also a major challenge for the authorities to make sure the reforms are foreseeable andsustainable.

Despite all challenges, experts still have confidence in the prospects for the Shanghai FTZ.

China is very much forced into FTZ reform because of its domestic economic imbalances andthe external pressure such as from the Trans-Pacific Partnership Agreement led by the UnitedStates, Chen said.

“If the Shanghai FTZ fails, China’s overall reforms will fail,” Chen said. “There is not a blueprintfor the Shanghai FTZ… but we should use Singapore and Hong Kong as reference points,” hesaid.

Meanwhile, he said, the financial service sector will be the highlight of the reform. “We willdefinitely see competition between financial institutions under all kinds of ownership.”

In addition, the development of Shanghai FTZ will generate a knock-on effect for surroundingareas. According to Kuai, a shopping mall will be built near the FTZ to display tax-free goodsfrom the FTZ.

An Baohua, an official with the processing trade department at the General Administration ofCustoms, suggested similar tax-free shops in Hainan, where customers can buy tax-free goodswith their air-tickets, can be used as a reference point for the one in Shanghai.

Kuai also said the 315 sq km Lingang area, which is located to the southeast of Shanghaidowntown, is making preparations to carry out the next phase of expansion of the FTZ, andmajor developers including Waigaoqiao are ready to join in the work.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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