Posted by EeGhim Chua on Fri, Sep 27 2013

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As the world gears up for the Shanghai Free Trade Zone

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Forget QE tapering for a moment. China is set to dominate financial headlines for the next few days as it gears up for the launch of the Shanghai Free Trade Zone (FTZ) this weekend.

It is undoubtedly an ambitious effort to push Shanghai towards becoming a global commercial hub. According to Xinhua news agency (the official press agency of the People's Republic of China) the FTZ, set to launch on 29th September, will be the first of such free trade zones on the Chinese mainland which “allows goods to be imported, processed and re-exported without the intervention from customs authorities’. The primary function for this zone will largely be traditional - to facilitate trade expansion and attract foreign direct investment.

The pilot zone is a crucial move for China to adapt to global trade and economic developments and establishes a more proactive strategy which will help “explore a new path for China's opening up, speed up transformation of government functions and promote economic restructuring”, according to a statement by the Ministry of Commerce.

The key buzz from this development lies in the potential of policy reforms that China will test out, particularly in the financial sector. This involves liberalization of interest rates, increased convertibility of yuan and fewer restrictions on foreign investments to promote capital flows in and out of the zone. However, Reuters reported that the announcement from its State Council, or cabinet on Friday did not give a specific date and roadmap for implementation of any reform, but said it is likely that they will happen within the next two or three years years. Symbolically, the move is an affirmation of the commitment to reform the financial sector, as mentioned by Chinese premier Li Keqiang at the World Economic Forum in Dalian earlier this month.

Many banks, economists, analysts and legal advisors have stepped up their communication efforts in an attempt to express their opinions and expert advices on the latest economic experiment by the Chinese government. Royal Bank of Scotland recently published a “Top View: China,” report which features an analysis of the FTZ. Economists and analysts have joined in the chorus of opinions via the wide coverage that is currently ongoing across key media in APAC.  Singapore-based OCBC bank and Hong Kong- based Bank of East Asia have also reportedly expressed their interest in participating in the FTZ trial, following the footsteps of global banks Citi and HSBC.

All the feelings of heightened anticipation and excitement are best summarised by the title of the Financial Times article written yesterday by Simon Rabinovitch – “Shanghai’s new zone: lots of hype, little detail”. In fact, exact details of what the FTZ encompass are still pretty, well, vague and there is a large amount of speculation on what it will eventually offer. South China Morning Post reported this week that the Chinese government intends to bring down the “Great Firewall of China” in this zone by allowing access to sites such as Facebook and Twitter, which has been blocked in other parts of China. But the People's Daily, the mouthpiece of China's Communist Party, has reportedly refuted that report.

To further fuel the discussion, here’s the rebuttal from the SCMP journalist on Twitter that took place moments after this article was completed:

27th September 4:46pm

Preview Image of a Tweet

Despite all the speculations and hype, the opening of Shanghai’s FTZ is still massive news for the financial world as it provides an avenue for banks and financial companies to establish their presence and seek further growth in China. From a communications perspective, it is also a prime opportunity for companies stepping into China, to increase their communication efforts to showcase the unique perspective and expertise that they can offer, thus inspiring trust and confidence in their respective target audience.

 For more updates on Asian financial news, follow @CognitoAsia on Twitter. 

Topics
China, Communications, Finance, Shanghai Free Trade Zone,
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