A disappointing first year for Shanghai’s much-hyped free-trade zone, seen as a pet project of Premier Li Keqiang and billed as a reform laboratory, raises questions about China’s commitment to opening up its markets as it wrestles with a slowing economy.
The 29 square kilometer zone on the outskirts of China’s commercial capital – hailed as Beijing’s boldest reform in decades – was meant to test changes such as currency liberalization, market-determined interest rates and free trade.
But progress has been slow and policies vague as the political focus has turned from reform to shoring up growth, leaving foreign companies unsure of investing in the free-trade zone (FTZ).
“There has been some progress in the Shanghai free trade zone, but the progress is much slower than the market had expected, especially in the financial market sector,” said Zhu Haibin, chief China economist at JP Morgan in Hong Kong.
In particular, China needs to transform government functions and release a list of which sectors are off-limits to foreign investors rather than assessing investments on a case-by-case basis, Zhu said.
“If the progress is too slow on this front, it may risk turning out to be a failure.”
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