China Opens Shanghai Free Trade Zone

The Chinese government has opened the 11-square-mile Shanghai free trade zone which serves as a testing ground for free-market policies.


The government plans to allow trials of yuan convertibility in capital flows in the zone. Also in the pipeline is the establishment of an international energy center to trade crude futures.


The zone’s executive deputy director, Dai Haibo, says that free trade zone companies and financial institutions will be allowed to invest in Shanghai securities and futures markets, while qualified overseas individuals in the zone may open accounts to trade local securities. Overseas parents of companies registered in the zone will be able to issue yuan-denominated bonds in China.


Among the first to announce their participation in the zone are Citigroup Inc. and Bank of China Ltd. DBS Bank Ltd. and Bank of Communications Co. also said they got regulatory approval to set up in the zone.


An additional 25 companies, including units of Porsche AG, SAIC Motor Corp. and a trading unit of BNP Paribas SA were also granted licenses.


Bloomberg says that the establishment of the zone echoes moves by paramount leader Deng Xiaoping in the late 1970s, when he set in motion the Shenzhen Special Economic Zone. That allowed foreign investors to set up factories that employed workers to make shoes, toys and electronics for export.



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