In a long-awaited announcement from its State Council, or cabinet, China said it will ease regulatory curbs for foreign investors to set up operations in the zone and free up controls on cross-border capital flows.
The announcement does not give a specific timeline for implementation of any specific reform, but said they would be carried out within the next two or three years. State media has cautioned that the most dramatic financial reforms are unlikely to be implemented this year.
As expected, the major focus, for the first phrase at least, is on promoting trade, wrote Frances Cheung, economist at Credit Agricole CIB, in a research note. We note that one thing that is relevant to the RMB is under point (2) where eligible Chinese banks in the FTZ are allowed to do offshore business, which is not the opening-up of the onshore RMB market as some might have looked for.
The China (Shanghai) Pilot Free Trade Zone is slated to open formally on Sunday, and China will suspend certain national laws governing the establishment of foreign businesses in the zone effective October 1.
The document was published on the State Councils website on Friday afternoon.
In addition to setting goals for improvements to financing, trade and governance, the document details initiatives covering 18 different industries ranging from shipping to insurance to education to foreign banks.
The document made no specific mention of allowing access to blocked foreign websites such as Facebook or Twitter from within the zone, despite widely circulated rumours in foreign media. However, a clause did say foreign companies might be allowed to offer specialised telecommunications services within the zone, and that permission to offer services that break existing Chinese laws might be granted on a case-by-case basis by the State Council.