The move may soon herald a package of wider reforms
China will unveil on Sunday its newest free trade zone in its financial capital Shanghai, introducing moves to liberalise the economy in a trial programme, which, officials say, may soon herald a package of wider reforms.
Officials have said the zone’s policies, including moves to allow yuan convertibility and liberalise interest rates, reflect the leadership’s intention to soon introduce far-reaching reforms. State media have even drawn parallels to the opening of China’s first Special Economic Zone in Shenzhen, which became the symbol of former leader Deng Xiaoping’s landmark economic reform and opening-up.
The current leader, Xi Jinping, is facing the more difficult challenge of restructuring the economy at a time of global uncertainty. As China shifts to slower growth, the government is looking to rebalance the export-driven and State investment-led model by boosting consumption, services and innovation industries.
The State Council, or Cabinet, described the zone as “a part of the national strategy to accelerate transformation of government function, explore innovation of management mechanism, and promote trade and investment facilitation,” in a statement on Friday.
“The zone should function as a test field for reforms and an open economy that would provide experience that can be duplicated and promoted nationwide,” the government said, adding that the zone would “become a vehicle to more deeply integrate” China with the rest of the world, and a centre for “reform experiments over the next two or three years.”
The official Xinhua news agency said the zone covers four existing ‘bonded zones’ in Shanghai, including the Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
Analysts in China have, however, expressed a more measured reaction to Sunday’s unveiling, seeing the zone as more as a limited trial project rather than the harbinger of far-reaching rooms. Of 17 respondents to a survey conducted by Bloomberg, eight said the zone would have “no effect or a negligible impact on growth”.
Of greater importance to China’s reform prospects is a crucial November plenary meeting of the Communist Party, which will debate moves to open up several sectors now under State control.
But whether or not the leadership under Mr. Xi is able to push those measures is still unclear, as he will have to overcome significant resistance from within the party, especially from interest groups tied to lucrative state-run firms that still command vast swathes of the Chinese economy.