The Shanghai FTZ is the first touchstone of global finance

October 01, 2013

Maeil Business Newspaper recently interviewed CKGSB Professor of Finance Chen Long, who offered his insights into the new Shanghai Free Trade Zone and what it means for China.

“The Launch of the Shanghai Free Trade Zone (FTZ) is equivalent to the installation of an off-shore finance center in China.” 
During an interview in Beijing on September 30, Professor Chen Long, Associate Dean at CKGSB, one of the best business schools in China, claimed that the newly launched Shanghai Free Trade Zone has established a foothold for experiencing the overseas financial environment inside China. He added that the global competitiveness of several credit banks in the Shanghai FTZ will become incomparably higher than any other credit banks in China.

Professor Chen predicted that the Shanghai FTZ will bring about a massive change in China. He stressed that companies will no longer have to go all the way to Hong Kong to import and export because the same business can now be handled in the Shanghai FTZ. Professor Chen also explained that companies will be able to freely issue bonds in the FTZ and thereby raise funds both domestically and internationally, highlighting that this implies the permissible range of inflow and outflow of funds will be widened.

Professor Chen said that the implementation of a “Negative List” is especially noteworthy. Whereas in the past, companies needed to get permission from the authorities in order to proceed with activities not specified in the regulations, everything can now be carried forward legally in the Shanghai FTZ. Regarding it as a drastic decision made by the Chinese Government to harmonize its system with the global standard, Professor Chen commented that it is the most important event in the contemporary financial history of China.

Nevertheless, this does not mean that infinite freedom is guaranteed in the Shanghai FTZ. Professor Chen clarified that the Shanghai FTZ is going to be operated separately from other regions and this means that the flow of funds from one place to another in China will not be flexible. He added that there is a certain degree of control over the flow of funds between FTZ and overseas in the same way  that the flow of funds between Hong Kong and China is controlled.

Emphasizing that the ultimate goal is to achieve advancement across China, Professor Chen said that the creation of the Shanghai FTZ is equivalent to Deng Xiaoping’s establishment of the Shenzhen Special Economic Zone and is therefore Prime Minister Li Keqiang’s most important economic policy.  The Shanghai FTZ implements a system that accords with the global standard in various sectors ,including finance and trade, for the first time in China. This sets a good precedent that will eventually spread across the country later on.

Original article

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