The People’s Daily reports that China approved the creation of a special free trade zone in Shanghai:
The project, occupying 28 square kilometers, will center around the Yangshan Deep Water Port and will take more than 10 years to build.
When completed, the free trade zone will provide world-class transport and communications facilities and a tax-free environment for domestic and foreign enterprises as a major hub of their supply chains in Asia.
The project was approved at a State Council meeting presided over by Premier Li Keqiang.
Under the central government’s guidance, the Shanghai municipal government will explore innovative methods of trade and investment management, facilitate trade and investment, and further open up the service industry. [Source]
The South China Morning Post claims that the new free trade zone could allow Shanghai to leapfrog Hong Kong as a financial hub. The pilot zone will enable the government to test a number of financial reforms, according to David Barboza of The New York Times:
Analysts say the free trade zone will not just promote interest rate liberalization and currency convertibility but will also allow “financial product innovation” and the raising of money abroad or investment in foreign stocks by corporations.
[…] “The State Council expects this experiment as an essential step towards upgrading China’s economy,” Qu Hongbin, an economist at HSBC in Hong Kong, said in a report on Thursday. “It also expects the pilot’s eventual national rollout.”
It is unclear exactly how the free trade zone would operate, but businesses and traders in the zone would probably be more free to import and export goods without customs approvals, and to convert foreign currency into renminbi more freely. [Source]