Shanghai's Free Trade Zone, the Impact

Shanghai's Free Trade Zone, the Impact


Tom Holland / MONITOR Column in today's SCMP:


What Shanghai's brand new Free Trade Zone won't offer:

"There won't be free flows of capital and market interest rates"


China still says "the risk must be controlled"


If they allowed market rates there - a Huge arbitrage opportunity would open up


The Chinese govt, and its SOA's like cheap interest rates, and they are not going to allow Shanghai to interfere with that.

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Also: Premier Li Keqiang is said to be "the father of the Free Trade zone", but he did not show up at the opening, suggesting it is being launched into a "complex political environment"

I think that this can be disruptive change in China. If it succeeds, HK definitely will be affected as there's no more compelling reason to use it as a jumping board to China.

Another good step forward for China. Yes they have are still highly socialist but they've been going in the right path for 30+ years now. While the developed world is busy centralizing its power, the Chinese are taking continuous positive steps towards liberalization.


I am not worried about this affecting HK negatively. First China is severely lacking in the rule of law and many businesses will, for a very long time, still prefer to run operations in Hong Kong (if possible). Secondly it is a common fallacy to assume that new competition is going to steal away the success from incumbents. Generally what happens is that the new competitor brings in new production and increased rates of productivity from which the incumbent is then incentivized to surpass, thus increasing the quality of living for everyone. New producers don't make us worse off, it makes us all better off and equalizes the general standards of living.


HK didn't fall apart when it lost manufacturing to China decades ago, and it won't fall apart if it loses financial services to Shanghai. The great thing about free markets is that they continuously revitalize and reinvent themselves in order to maintain, or increase, their standards of living. What would make me worried is if you saw the HK government put on protectionist measures in order to try to maintain its status quo economy - that would be a clear sign of a long term decline in HK. Thankfully though, I see no signs of that at the moment.

Some VIDEOS


Shanghai Free Trade Zone - The Next Shenzhen (CCTV)

1/2 : http://www.youtube.com/watch?v=pS9DWU2wTkM

2/2 : http://www.youtube.com/watch?v=a70tmppdo_I


Will Shanghai Free Trade Zone be another Hong Kong?

: http://www.youtube.com/watch?v=wqQK0_uUC1A


Article in SCMP:

Qianhai bypassed, as firms head for Shanghai

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"already stealing business from Qianhai"

+ Qianhai is smaller: 15 sq.km, while Shanghai's FT Zone is : 29 sq km

+ Sinopec and China Taiping Life Insurance, are rethinking plans

+ Shanghai Zone's impact felt thru China, Q. only in HK


Many details on how the Shanghai Zone will operate are still unclear

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Qianhai thread : http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/149705/qianhai-new-boomtown-nr-hk/