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Shanghai free trade zone no threat to HK
Publication Date : 01-10-2013
Amid initial anxiety that Hong Kong is about to be upstaged as a gateway to the Chinese economy, Beijing has sought to give the assurance that Shanghai's new free trade zone (FTZ) is no threat to the special administrative region.
This came even as firms and analysts here adopt a wait-and- see attitude towards the FTZ, given a lack of concrete details about the zone and Beijing's seeming ambivalence about how far it wants to push the envelope.
Leaked high-profile details of lower income taxes and unfettered Internet access, for instance, have been refuted by Chinese officials.
Speaking at the FTZ's launch on Sunday, the commerce ministry's international trade director Yin Zonghua said it will have "no negative impact" on Hong Kong.
Instead, Hong Kong firms could do business there and benefit from its preferential policies.
"Hong Kong has its own advantages that can be utilised within the FTZ. It will promote Hong Kong's prosperity and stability," Yin said.
He added that Beijing will make further arrangements to deepen economic ties between the mainland and Hong Kong, but gave no details.
The Shanghai FTZ is being trumpeted as a test bed for China's market-oriented reforms, including exclusive financial free- doms such as eventual full currency convertibility and liberalised interest rates.
This gave rise to initial jitters that Hong Kong, designated as China's global offshore yuan centre, will diminish in importance.
Its status as a hub for company headquarters could conceivably also come under threat, given that the new FTZ will liberalise foreign investment rules and treat foreign-Chinese joint ventures no differently from Chinese companies.
Earlier this month, Hong Kong tycoon Li Ka Shing opined that if the FTZ "is allowed to freely convert the yuan, Shanghai will steal a march on Hong Kong".
Murmurs of Hong Kong- Shanghai rivalry got louder when the first batch of 36 firms approved to set up shop in the FTZ was notable for the absence of Hong Kong entities. Coveted spots for banks went to eight mainland banks and two foreign ones - DBS and Citibank.
But experts note that Hong Kong still holds a few trump cards given the rule of law that underpins its financial and economic workings.
Said economist Nathan Chow of DBS Hong Kong: "In terms of competition to Hong Kong, there will be limited impact in the short term... Yuan convertibility is particularly sensitive, so it will happen gradually."
Dr Jonathan Choi, chairman of the Chinese General Chamber of Commerce, said it would "take some time before Shanghai catches up with Hong Kong". And even then, "China is a big country and it's quite normal to have two financial centres".
Meanwhile, there are opportunities for Hong Kong companies. Accounting, law and consultancy businesses can set up shop in the FTZ, said Chow.
Mabel Chan, vice-president of the Institute of Certified Public Accountants, wants preferential policies for Hong Kong firms moving into the FTZ, such as a loosening of the rule that accountants must have worked on the mainland for three years.