Shanghai has trimmed the list of what is banned in China's first free trade zone, opening a few more areas to foreign participation, it said Tuesday, following disappointment over the new FTZ. The Shanghai government released a new "negative list" of what is barred in the zone, cutting the number of items from 190 to 139, according to the document posted online.
The FTZ in China's commercial hub was launched last September, a much-heralded move promising widespread reform including free convertibility of the yuan currency. The original "negative list" was issued at the same time. But Tuesday's revisions were limited, the new list showed, among them allowing some foreign companies to use Chinese airline reservation systems, and scrapping some requirements for investing in medical facilities. Foreign investors would be allowed to set up wholly-owned companies to design yachts and manufacture aviation engine components. They would also be allowed to process green tea through joint ventures with Chinese partners.
Initial excitement that a ban on investment in some forms of gambling could be lifted, including lottery tickets and horse racing, was dashed when a government official said such activities were off limits to both foreign and domestic firms. In addition, 23 of the reductions were the result of merging items together, the official Xinhua news agency reported.
Some analysts had expected the list to be slashed. "The Shanghai FTZ is off to an ambiguous start," real estate services firm Cushman & Wakefield said in a report last week. "The opacity of the rules governing the FTZ, the uncertainty about its future and the slow pace of reform have led to concern that the much-heralded zone will deliver far less than officials have promised," it said. Companies have still been flocking to the zone in anticipation of future opportunities, with office rents doubling in the last year - but largely due to speculation, Cushman & Wakefield added.
By the end of June, 1,245 "overseas" firms had set up in the FTZ, though the figure includes companies from Hong Kong and Taiwan, the Shanghai government said. "The Shanghai free trade zone is a test field for the country's deepening of reform and opening," Dai Haibo, deputy director of the management committee for the FTZ, told a news conference. Last week, China began allowing Shanghai banks to set interest rates themselves for foreign currency deposits under $3.0 million, extending a policy already in effect in the FTZ. Canberra is urging Australian financial institutions to set up in the FTZ, Treasurer Joe Hockey said last week, so that they can "become active in the dialogue about the definition of the rules for the free trade zone".
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