On Sunday, China opened a new, 28 square kilometer free trade zone in northern Shanghai. The zone will feature loosened restrictions compared to greater China, such as more freedom for banks and the opening of several industries. Foreign investors and companies hope the new zone will allow for easier access to the Chinese market, but the Chinese government has released few specifics on the regulations and rules of the zone. This has brought along skepticism on whether the zone will have any meaningful impact.

The Chinese government has labeled the free trade zone as an experiment, to see how the changes work to stabilize and grow the economy. Many experts have said that an overhaul of the Chinese economy is needed to continue the economic growth China has experienced, and some think this zone can be a model for future countrywide reforms. Others are not quite so sure, pointing out the zone could just be a sign of reform, while postponing any truly impactful, nationwide reforms.

Of the few details released by the government, it is known that regulations are being relaxed on interest rates and currency exchanges. This has a chance to impact banking in China, as there have already been ten banks which have gotten approval to move into the zone, including two foreign banks. The government is also opening up eighteen industries to foreign companies, such as the video game, natural gas, and shipping industries. This could give more companies access to the huge Chinese market, which would be beneficial for international trade.

The new trade zone in Shanghai is a promising sign that the Chinese government is focused on economic reforms to become more open, but without details on the exact restrictions, questions remain on whether the zone will be a success. The government still has not said whether free internet access would be allowed in the zone, and it is not known whether the telecommunication industry will be opened to foreign investors. The new zone could be a starting point for major reforms, but this will depend on the Chinese government’s willingness to relax decade old restrictions and become more welcoming to foreign business.

Share this article