This Sunday China’s first free-trade zone was officially opened in Shanghai. This is the first of its kind to be undertaken by the strict Chinese government.
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It is viewed as an experiment in economic progress and is done in hopes of changing the nation to open up fiscal policy and foreign trade.
Minister of Commerce, Gao Hucheng, expressed that the government has high hopes that the zone will behave as “an experimental field to conduct economic reform”.
Thus far 25 companies, both local and foreign, have been granted necessary licenses in order to begin trading in the free-trade zone.
Some of these companies include a venture between Microsoft and Bes TV, Industrial and Commercial Bank of China in addition to 11 other financial institutions.
This pilot zone has been allowed a number of different leniencies. The use of different currencies will be allowed and experimenting on the conversion of China’s Yuan will be permitted.
For the first time the interest rates on foreign exchange will no longer be set by regulators, but the market will determine future rates.
In addition, restrictions on the tightly controlled services segment will be lifted and 18 different sectors will be permitted to trade in the zone.
Some of the sectors are shipping, engineering and unexpectedly, the video game industry, which up until this point has been banned in China. These steps will stimulate foreign investments in these different sectors who many believe houses huge potential for growth due to the low cost labour available in the nation.
Numerous members of the Chinese government are expressing their interest in growing as an economic hub and have reiterated that this project is a single step in a much larger long-term plan.
A governmental spokesperson said in a statement on Friday that the Shanghai zone is a testing ground change for the entire nation. It is key in creating space for competition that the Chinese economy is desperately lacking.
In addition and in line with the government’s enthusiasm, they have stated that it is a learning process and if necessary measures are needed to further open up the free-trade zone, they are willing to take additional steps forward.
The China Pilot Free Trade Zone is a large space that covers existing trade zones in the Pudong district in Shanghai. It covers a radius of over 25 square kilometres and its reach end at the trade zone by the airport.
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