Shanghai free trade zone sputters

A closed ATM machine is seen at the Shanghai Free Trade Zone in Pudong district, in Shanghai, China. (Reuters)
Updated 02 September 2019

Shanghai free trade zone sputters

  • While the Shanghai FTZ, opened in September 2013, has long struggled to live up to its initial promise of free-flowing currency and easier international trade

SHANGHAI: When China launched the expansion of the Shanghai Free Trade Zone (FTZ) recently and announced six new zones in July, officials touted the efforts to attract foreign investment and deepen trade ties with neighboring countries.

Yet, for many businesses the FTZs have simply failed to live up to their hype, undermined in part by Beijing’s capital controls as an escalating trade war with the US slows China’s economic growth to 30-year lows.

Back in Shanghai, in the first FTZ area, chairs lie overturned and desks sit empty behind padlocked glass office doors. Food courts that once overflowed with business diners have seen small eateries steadily shut up shop this year, leaving used chopsticks and plastic packaging scattered on the ground.

While the Shanghai FTZ, opened in September 2013, has long struggled to live up to its initial promise of free-flowing currency and easier international trade, more businesses are increasingly deserting the 28.78-square-kilometer Waigaoqiao zone.

China Merchants Bank, now the country’s fifth largest by assets and profits, disbanded a 10-strong FTZ corporate business team at the end of last year, said two people with knowledge of the situation, spreading the staff among other branches after the lender found that the FTZ’s promised benefits were rendered useless as capital controls tightened.

Moreover, according to several bankers, hundreds of specialized accounts lie untouched across the FTZ as capital controls and regulatory scrutiny make free movement of currency — the hot selling point of the zone — untenable.

The people could not be identified by name as they were not authorized to speak to the media.

CMB said the bank has restructured its team in Shanghai because it attaches great importance to FTZ business, adding that assets in free trade accounts have increased by 67 percent at the end of August from the start of this year.

A spokeswoman for the Shanghai government said the authority was not aware of the capital control snags.

“The FTZs have reduced opportunities for local government taxes and also contradict Beijing’s attempt to reduce capital flight,” said Andrew Collier, managing director of Orient Capital Research.

“There are many conflicting desires in the FTZ — and they can’t be as effective ultimately as Beijing would hope,” he said, adding that the same issues will affect the new FTZs.

The idea in 2013 was that an onshore yuan account opened in a free trade zone bank branch could be used as if it were already offshore, meaning it could be exchanged, or used in payment free of domestic restrictions.

But bankers found the reality far from the hype and as concerns over capital flight led regulators to clamp down on yuan leaving the country from 2015, usability deteriorated further.

Users of an FTZ account “have to tick more than 40 boxes before they conduct one transaction. After all the due diligence, the FTZ account is no longer convenient,” said Ding Jianping, professor at Shanghai University of Finance and Economics.

“Convenience, and the concept of auto transaction used to be the selling point,” he added.

And even though Beijing plans to expand the zones, capital controls will remain strict for the foreseeable future, meaning the FTZ is unlikely to improve for lenders.

There are currently 119 finance firms in Shanghai with a registered office including the words “free trade zone,” according to a data grab on Qichacha, an information provider that uses official company registration sources.

Out of the 119 finance firms, only 3 currently have a Waigaoqiao area address.

Shanghai Huarui Bank shut its Waigaoqiao branch back in 2015, only to open another in a different part of the free trade zone when the government expanded the pilot area. While the new branch is still handling FTZ business, the prospect for growth is losing steam, said a person with direct knowledge.

The Bank of Ningbo currently has four branches in the FTZ, but while they’re still expanding, most of the work done is normal banking business.


Jubilant cheers as Dubai begins one-year countdown to Expo 2020

Updated 1 min 36 sec ago

Jubilant cheers as Dubai begins one-year countdown to Expo 2020

  • Dubai prepares for eye-catching countdown on Burj Khalifa
  • Live performances from singer Mariah Carey and acclaimed Emirati singer and Expo 2020 ambassador Hussain Al-Jassmi

DUBAI: Crowds gathered at different locations in the UAE on Sunday night to mark its one-year countdown to Expo 2020 in October next year, with host emirates Dubai staging a spectacular concert, topped by a light projection on the iconic Burj Khalifa.

American superstar Mariah Carey was the star of the night, which also saw performances from regional artists including Khalifa, Shamma Hamdan, Abri and Funk Radius, Showcase and Jaysus Zain. The audience also grooved to a few Arabic tunes from Emirati singer Hussain Al-Jassmi.

A make-shift stage was set up at the Burj Park in Dubai’s downtown area to host the performances, while people also enjoyed a good view of the tallest building in the world. The countdown was facilitated by Emirati social media sensation Khalid Al-Ameri and Bollywood actress Shraddah Kapoor. 

A 3-minute firework display lit up the skies of Dubai as the crowd eagerly waited for Carey to appear on stage.

The 49-year-old singer sang her all-time favorite songs, including “Emotion,” “We Belong Together,” and a revival of the Motown classic “I’ll Be There,” to an enthusiastic audience who didn’t mind the heat and humidity at the outdoor venue.

The other six emirates also marked the occasion with free-for-all activities in venues such as the Louvre Abu Dhabi, Al Majaz Waterfront in Sharjah, Ajman Museum, Umm Al Quwain Corniche, Al Qawasim Corniche in Ras Al Khaimah and Fujairah Fort.

The events, Minister of State for International Cooperation and Expo 2020 Director-General Reem Al-Hashimy said, will “offer a window into the once-in-a-lifetime celebration that awaits from October 20, 2020.”

“The next 12 months will see us put the finishing touches to ensure an exceptional World Expo,” she added, in a report by state-run WAM.

The Louvre Abu Dhabi featured YouTube sensation Sandra Sahi, as well as singers Stephon Lemar, Layla Kardan, the Emirati Trio.

Indian band ROOH, singer and pianist Clarita de Quiroz, Egyptian oud player Rami Zaki and other regional artists were celebrating the count down at Sharjah’s Al Marjaz waterfront.

While the Ajman Museum hosted Arabic fusion band, pop-rock musician Hydyy, Emirati soul singer Chakram, poet Storm Fernandes, artist Humaira Hussain and MC Mohammed Enaba.

The 6-month Expo 2020, to be held at a vast new site in the south of Dubai, will officially open on Oct. 20 next year, with organizers expecting an estimate of 25 million visitors.