Shanghai Free Trade Zone Opens with Ground Breaking Changes

Shanghai Free Trade Zone Opens with Ground Breaking ChangesThe free trade zone in Shanghai started its operation yesterday after a trial run of its ground breaking changes in the efforts to free cross border commodity and let capital flows into the second largest economy of the world. The first batch of Chinese and overseas companies were given licenses to register in the free trade zone.

Last week China revealed a detailed plan for the free trade zone in which the country now allows free yuan convertibility under capital accounts, cross border use of the yuan and interest rate liberalization on a trial basis as long as the risks will be controlled. A suitable foreign exchange management system will also be established to assist in the trade and investment in the free trade zone.

The free trade zone will also allow the market to decide prices of the assets of financial institutions which is also known as securitization of assets since policy makers are hoping to catalyze further reforms using experiments. There will be 18 service sectors in the free trade zone that will open to serve foreign and private capital from shipping, commerce, culture and finance.

Foreign companies are now allowed to conduct specific types of telecommunications value added business with conditions of ensuring information security. Meaning these companies are now allowed to establish call centers and provide internet information and offer software technology services. Furthermore they are now allowed to sell and produce video game gadgets in China.

Also foreign travel agencies that are registered in the free trade zone can conduct business trips overseas. For the first time entertainment agencies are allowed to operate in shanghai. Foreign companies can also join up with its Chinese partners to open and operate educational and vocational training institutions, establish independent medical institutions and provide health care insurance services as well.

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