The Guangdong Free Trade Zone, modeled on Shanghai's pilot FTZ, would enhance regulatory transparency and offer easier renminbi lending to international investors.
Finance, services seen to benefit most from new FTZs based on Shanghai's
Hong Kong is set to benefit greatly from the launch of the proposed Guangdong Free Trade Zone (FTZ), which is expected to be modeled after Shanghai's, as it could be an expanded version of Shenzhen's Qianhai special economic zone, scholars and experts said.
Premier Li Keqiang told an executive meeting on Dec 12 that Guangdong and Fujian provinces and the northern port city of Tianjin will follow Shanghai's lead and establish FTZs in their respective jurisdictions.
The new zones would be based on the same model as Shanghai's, but each would have its own "local characteristics", according to the State Council.
Raymond Yeung, a senior economist at ANZ, told China Daily that Hong Kong stands to reap benefits from the Guangdong FTZ as the Qianhai Shenzhen-Hong Kong Modern Service Cooperation Zone can be regarded as a "preview".
When established, enterprises operating in the Guangdong FTZ can borrow renminbi directly from Hong Kong banks, just like what they are doing now in Qianhai, said Yeung, adding that the Guangdong FTZ is expected to be more open and closely connected with the SAR.
Yeung also noted that in the Shanghai FTZ, companies are allowed to invest beyond the boarder of the zone through their overseas branches under "inter-company loan", and the investments don't require the approval of the State Administration of Foreign Exchange.
"This could also happen in Guangdong, resulting in more companies there investing in Hong Kong," he said.
Yuan Chiping, a professor and director at the Center for Studies of Hong Kong, Macao and the Pearl River Delta at Sun Yat-sen University in Guangzhou, told China Daily that the new economic zone could function like Qianhai.
"I expect banks, as well as other financial services companies in Hong Kong, to enter Guangdong province to compete directly with mainland banks and other companies after the zone is established," said Yuan. Through the new FTZ, Hong Kong's services industry can be extended to the mainland, economists said. What's more, various professional services in Hong Kong can set up practices there, he said. Yuan noted that many Hong Kong companies have already established branches in Qianhai, but Qianhai is only a small area compared to the proposed Guangdong FTZ.
Peng Peng, vice-president of the South Non-governmental Think-tank, said there are four innovative systems that Guangdong can learn from Shanghai - the investment management system based on a negative list; the trade supervision system focusing on trade facilitation; the financial innovation system aimed at opening to foreign participation; and a comprehensive supervision system.
According to the scheme submitted to the State Council last December, Guangdong's FTZ will consist of three new areas - Shenzhen's Qianhai, Zhuhai's Hengqin and Guangzhou's Nansha, plus the Baiyun Airport Comprehensive Bonded Zone, covering a total area of about 931 square kilometers.
With the overall aim of strengthening links with Hong Kong and Macao, the three new areas will have their own specialties.
While the Qianhai Cooperation Zone will continue to focus on the development of the high-end services industry, Hengqin's development will mainly cover tourism, commercial services, high-tech and cultural and creative industries. By comparison, the development scale of Nansha is larger, including port facilities and dedicated manufacturing districts.
"The common characteristic of the three new areas is that they are all important carriers for promoting cooperation among Guangdong, Hong Kong and Macao," said Yu Yunzhou, deputy director of Guangdongs's Development and Reform Commission.