Banks sign up to Shanghai trade zone

HSBC and Standard Chartered, the two British banks that make most of their profits in Asia, have signalled interest in a proposed free-trade zone for Shanghai.

Standard Chartered said it was "committed to contributing to the further development" of the zone, and HSBC is also interested in establishing a presence in the zone.

Attracting international lenders will help China achieve its goal of making Shanghai a global financial hub by 2020. The zone, which as well as international trade would feature looser regulations on matters such as interest rates and business licensing, is part of Premier Li Keqiang's drive to sustain growth by shifting the economy toward services and consumption.

"The Shanghai free-trade zone has to be a place that allows banks to operate on an equal footing with banks in Hong Kong, London or New York," said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia. "We hope the authorities will stick to less risky types of trading activities, at least at first, in the Shanghai free zone. Risk controls in the mainland banking sector seem flimsy enough at present."

China announced last month its cabinet had approved plans to set up the nation's first free-trade zone on 29 square kilometres in Shanghai, describing it as crucial in adapting to global economic development, while further opening up the world's second-largest economy.

Policy makers may allow free conversion of the yuan and market-oriented interest rates on a trial basis in the zone, a draft plan says. Qualified foreign banks may be allowed to set up branches or joint ventures with local lenders, and some Chinese banks may offer offshore banking services.