The Shanghai zone opened with few solid policies that might fundamentally recharge the broader economy or unlock its heavily regulated financial system. Even supporters have been frustrated by the policy inaction, leaving many to wonder how serious authorities are about true reform. The fact that no top Chinese leader seemed to have time to schedule a visit to the Shanghai zone was taken by China watchers as a sign of bureaucratic battles in Beijing.
Economists found reasons to doubt the impact. A list of what isn’t permitted is seen as too long. More than 16,000 businesses have registered to do business in the zone, though many firms applying for licenses there are companies already established in the area that authorities encouraged to re-register.
Mr. Xi’s visit came at the tail-end of a weeklong visit to Shanghai, where he also welcomed dozens of Asian leaders to a security summit that groups non-western nations. He signed a deal withVladimir Putin to import hundreds of billions of dollars’ worth of gas from Russia and observed military drills between the two countries.
Over the weekend, Mr. Xi also toured Shanghai plane-making facilities operated by Commercial Aircraft Corporation of China and sat in the cockpit model for its C919 passenger jet.
The Shanghai pilot free-trade zone is considered financial-sector-oriented, and a litmus test of the Xi-run government’s appetite for reform.
Financial analysts say hints of positive change are appearing, in particular ways to move money into and out of China using business entities registered in the zone. The adjustments are highly technical; one set of rules relates to a corporate balance sheet management strategy known as “cash pooling” not allowed elsewhere in China and another deals with how certain bank accounts can be used. But they do suggest to analysts nascent efforts to introduce a more market-oriented currency-exchange policy that is currently governed by knotty rules.
“The financial reforms for the FTZ are clearly a further step on the road to internationalization and ultimately full liberalization of the” Chinese yuan, said a recent analysis of the experimental rules being introduced there by law firm Hogan Lovells.
Mr. Xi’s visit should reduce doubts that he never liked the idea of a Shanghai zone.
“He’s the No. 1 guy in China, and there were reports before that he was worried about the risk control,” said Chang Chun, executive dean of the Shanghai Advanced Institute of Finance.
Moreover, the president’s cautionary remarks dovetail with another view of Mr. Deng that helped allow China’s economy to develop: his preferred strategy for introducing potentially destabilizing economic reforms, dubbed “crossing the river by feeling the stones.”
Source: WSJ
