Shanghai has created a free trade zone to rival that of Hong Kong. It’s the first metropolis to do so in mainland China, and highlights the city’s ambitious attempt to become a world commercial capital.
The project will be launched on a trial basis this year. Goods will be able to flow unhindered through ports, with zero tariffs on imports or exports. In Hong Kong, the free trade zone has led to unprecedented growth and prosperity. It is the capital of the region’s financial, trading, and shipping firms – a title Shanghai hopes to usurp.
China has pursued bonded “Special Economic Zones,” which are effectively mini-free trade zones within cities. Goods can be imported duty free, processed, and exported with no tariffs. However, the central government has been concerned about losing effective control over a special zone that is too large.
The current move could stumble against concerns that Shanghai could siphon business away from Hong Kong, leading to instability in the semi-autonomous city. This could lead to a “go-slow” approach in Shanghai.
Beyond imports and exports, officials envision financial liberalization, including allowing citizens to open foreign denominated bank accounts which are exempt from mainland oversight and regulation of foreign-exchange authorities.
Currently, Shanghai has bonded zones at the Yangshan deep-water port, Pudong airport, and Waigaoqiao port. It will upgrade facilities at those locations during a trial run of the free trade concept.