Mayor promises to speed FTZ reforms
Print Edition
SHANGHAI’S Mayor Yang Xiong has promised to speed up development of China’s first pilot free trade zone.
The FTZ was set up in Shanghai last September with the promise of a range of financial reforms, including full convertibility of the yuan and free interest rates — promises which remain unfulfilled.
Yang said yesterday the government would work towards making the yuan freely convertible, among other financial liberalization plans for the FTZ, but gave no timetable.
“We will gradually put in place an institutional and regulatory framework to enable the convertibility of the yuan under the capital account so that the financial sector can better serve the real economy,” the mayor told business leaders at the 26th forum of the International Business Leaders’ Advisory Council.
Yang said the government would be offering a revised “negative list” of what is barred in the FTZ for 2015, following criticism that previous lists were too long.
“We will further liberalize the service sector by rolling out a series of new measures and compiling the 2015 version of the negative list,” he said.
“Assessments by third-party institutions on the zone’s first-year operation showed breakthroughs have been made in many areas to build a service-oriented government and to allow market to play a leading role,” Yang said.
He added that companies had expressed a high level of satisfaction with institutional innovation and reform measures piloted in the zone.
“However, there is still a long way to go as assessment also pointed to gaps between the Shanghai free trade zone with some world-level zones in terms of market openness, trade facilitation, financial deregulation and administration system,” he said.
Advertising giant WPP Group CEO Martin Sorrell, who was elected the council’s chairman yesterday, suggested treating the marketing of Shanghai’s pilot free trade zone as a product and focus on differentiation.
“It should be a business-to-business campaign with very elite targets,” Sorrell said. “We don’t need lavish spending but should carefully design the campaign to make it different from the other 3,000 free trade zones around the world.”
He said the biggest advantage for the pilot free trade zone is the city itself, a busy port, a trading center and the commercial capital of the world’s second-largest economy.
“We should have that explained, not only about Shanghai’s hardware infrastructure, but also the soft side the good services, the easy connection between people and its vibrant growth. It is the new version of New York in my eyes.”
But he said it was important to improve infrastructure construction around the zone, “including not only hard infrastructure but also soft infrastructure such as education, environment and health care.”
Foreign business executives attending the meeting welcomed the zone’s reforms.
However, there was an understanding that it takes time to experiment and deregulate.
Orit Gadiesh, chairwoman of American consulting firm Bain & Company, said: “The pilot free trade zone is a key reform for Shanghai and for China‚ the city should be cautious with every step it takes.”
She noted that several strategic industry sectors formerly restricted or banned from foreign investment had been opened up, and multinational companies will be able to get more deeply involved in the Chinese economy through the zone under financial deregulation.
Michael Diekmann, chairman of German insurance giant Allianz, said: “The time lag between announced and implemented reform measures has created an opaque picture that has led to a wait-and-see attitude among many foreign investors.”
Ulrich Spiesshofer, CEO of Swiss power and automation technology firm ABB Ltd, suggested the city conduct digitalization of administrative processes, while carrying out diversification of business incentives and deployment of global advocacy campaigns to draw in foreign investment.
“The pilot free trade zone is spearheading China’s efforts to upgrade its business environment in line with international standards,” he said as he expressed a willingness for his company to contribute to the zone’s innovative initiatives.
Paul Manduca, chairman of UK financial group Prudential Plc, said the pilot free trade zone will have to pay attention to policies that have led to poor performance in other zones such as uncompetitive fiscal incentives, restrictive controls on zone activity and cumbersome regulation.
“The key test for the zone will be the extent to which its policy innovations become successful reforms at the national level.”
Richard Burrows, chairman of British American Tobacco, said the zone needs to pay special attention to intellectual property rights protection.
“The creation of free trade zones around the world have helped the world economy, but products such as cigarettes, clothing and construction materials are entwined with parts of the sectors targeted by such zones,” he said.
“Shanghai’s pilot free trade zone should help ensure greater protection of intellectual property rights to meet its stated aims of improving Customs supervision efficiency and the further opening up of the service sector.”
Jean-Pascal Tricoire, chairman and CEO of French high-tech company Schneider Electric Group, called for better data protection in the zone and for visa application services to be made more efficient in a 5-minute address in Chinese.
Some 12,600 companies have registered in the FTZ with 14 percent foreign-invested firms.
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