Bulls vs bears
"The establishment of the Shanghai FTZ has been feeding this speculation," added Sinclair, who has lived in Shanghai for the past decade. "The China bulls are using the FTZ to project their hope for sweeping reforms ahead. The China bears remain skeptical, pointing to the FTZ's lack of detailed policies and initiatives, and concern about the prospects of the Third Plenum unveiling meaningful reforms."
Gutierrez said that the creation of the FTZ shows that the new leadership is serious about economic reform, and the project is one way for the nation to "offset" the pressure of losing manufacturing competitiveness because of wage increases.
"They are serious about reform and they understand that manufacturing is changing. As wages increase, manufacturing may go overseas, so China needs another growth engine," said Gutierrez. "And that growth engine could be the combination of a more open economy and more liberalization of financial services and other services."
As many link the rationale behind the creation of the new zone to the new leadership's economic reform agenda, Bo Chen, who advised the government on the zone, said that it was also driven by slower economic growth in China and "foreign aggression".
The influence of the Trans-Pacific Partnership Agreement is one example of that aggression, Chen wrote in a recent online commentary. Initiated in 2005, the TPP requires member countries to eliminate all tariffs and open their agricultural and financial services as part of the pact's bid to build a unified market in the Pacific Rim by 2020.
Membership in the trade pact grew significantly after the United States signed up in 2008.
The TPP was not immediately welcomed by some Asia-Pacific countries. Japan and Vietnam were persuaded by the US to join the negotiations, and China said that it would consider doing so in the July round of the US-China Strategic and Economic Dialogue.
"Despite rumors about what reforms the FTZ may herald, its long-term policy objectives will generally remain consistent with the requirements of the TPP," said Chen.
A close look at the zone shows that it does offer some policies that might attract foreign investment, especially when every global company wants a success story in China.
Go to Forum >>0 Comment(s)