Plans for a mailland free trade zone have been underway since January 2013 and the area officially opened at the end of last month.


Last January, Shanghai’s mayor Yang Xiong unveiled the megacity’s plan to develop the mainland’s first free-trade zone. The FTZ will first span 29 square kilometers in the city’s Pudong New Area, including the Waigaoqiao duty-free zone and Yangshan port and may eventually expand to cover the entire area of Pudong.

In the past, Beijing has approved over a dozen bonded areas, which are prototypes of free-trade zones. But Shanghai’s FTZ will be far more extensive and could bypass that of Hong Kong over time. The new Chinese leadership supports the plan.

But change never comes easy. In the past few months, Premier Li Keqiang has had to fight opposition by financial and banking regulators to open Shanghai’s financial services sector to foreign investors. The megacity will have a crucial role as China moves from investment and net exports toward consumption. Shanghai needs accelerated reforms in finance and trade, to boost the megacity’s maturing growth. 

The three-year FTZ plan is moving in parallel with financial reforms, which accelerated last year, when China tightened rules on delisting companies, cut trading costs, and encouraged dividend payments.

For over half a decade, China’s equity, bond, and currency markets have expanded significantly. Reformers hope that commercial banks can grow their lending, expand the fragmented bond market. They hope to move gradually toward the securitization of loan portfolios and to open doors to foreign investors and financial institutions.

Recently, the renminbi also made its debut on the list of the 10 most actively traded currencies, according to a survey by the Bank for International Settlements.

FTZ map

Read more about the plans for the FTZ from here. You can read about the regulations of the Zone from the Wall Street Journal here.