Asia weekly – China Reforming Free Trade Zone Shanghai

by: Maritza Cabezas

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China continues its reform agenda. On Friday, China’s authorities announced some general aspects surrounding the pilot Shanghai Free Trade Zone, which was already approved in July. The State Council mentioned that the overall objective is “to promote the opening up of the service sector and to reform the management of foreign direct investment”. The approach covers a broad range of topics including commercial trade, investment, financial services and RMB convertibility. In the case of investment, a negative list approach has been adopted meaning that all businesses will be admitted except those prohibited. However, as with other crucial reforms announced in the past year, much of the details are missing. There is no commitment to currency convertibility or financial liberalisation. We think that the macroeconomic impact of this plan will be modest given that it is a pilot programme which will be rolled out only gradually.