Banks sign up to Shanghai trade zone
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.
Frequently Asked Questions about this Article…
The Shanghai free-trade zone is a proposed 29 square kilometre area approved by China’s cabinet to trial looser rules on trade, interest rates and business licensing. It is part of Premier Li Keqiang’s push to shift the economy toward services and consumption and further open up the world’s second-largest economy.
HSBC and Standard Chartered have signalled interest in the proposed zone—Standard Chartered said it is committed to contributing to the zone’s development, and HSBC has expressed interest in establishing a presence there.
Attracting international lenders could increase cross-border banking services, boost liquidity and promote financial innovation. For everyday investors, greater international participation may broaden product choice and deepen markets as the zone trials looser rules on interest rates and foreign access.
A draft plan says policymakers may allow trial measures such as free conversion of the yuan, market-oriented interest rates, looser business licensing and relaxed rules that could permit foreign banks more operational flexibility within the zone.
The draft plan suggests that free conversion of the yuan may be allowed on a trial basis inside the zone, but this is described as a proposed, experimental measure rather than an immediate nationwide change.
According to the draft plan, qualified foreign banks may be allowed to set up branches or joint ventures with local lenders inside the free‑trade zone, expanding opportunities for foreign-bank presence in mainland China.
Yes. The article notes that attracting international banks to the zone is intended to help China achieve its goal of making Shanghai a global financial hub by 2020 by increasing international financial activity and aligning rules more closely with global centres.
Analysts, including Jim Antos of Mizuho Securities Asia, have urged caution: they want the zone to allow banks to operate on equal footing with hubs like Hong Kong or London but recommend starting with less risky trading activities because risk controls in the mainland banking sector are viewed as currently fragile.
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