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China unveils rules for Shanghai free trade zone

China has outlined a set of bold reforms including free yuan convertibility and the opening of its sheltered services sector. Alas, the new rules are valid only in the new Shanghai free trade zone opening October 1st.

In the newly established Shanghai free trade zone, China would allow free yuan convertibility and test market-set interest rates as well as cross-border use of the yuan in the zone, China's cabinet, the State Council, unveiled in a plan published on its website Friday.

Moreover, China would ease regulatory curbs on foreign investors seeking to set up operations in the zone, including allowing foreign financial institutions to open solely-owned banks and privately-funded Sino-foreign joint ventures, the statement on the website said.

In addition, restrictions on trade as well as 18 services sectors ranging from finance and shipping to cultural services would be eased.

“It [the zone] should be made an experimental field to push forward reforms, improve the open economy, as well as accumulate experience that can be duplicated and promoted,” the State Council's statement said.

On Sunday, China is to officially inaugurate the Shanghai free trade zone, which will amalgamate four existing trade zones in the city and span 29 square kilometers (11 square miles).

The State Council said the bold new reforms would be implemented in the zone over a period of three years and periodically adjusted.

The State Council document made no specific mention of a reported plan to liberalize China's tightly-controlled Internet in the zone.

Earlier this week, rumors circulated in international media that the government might allow access to Facebook, Twitter and other websites banned in China.

What the State Council did say, however, was that foreign companies might be allowed to offer specialized telecommunications services which would be granted on a case-by-case basis.

uhe/pfd (AFP, Reuters, AP)

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