September 13, 2013 / 5:58 AM / 6 years ago

Shanghai to launch free trade zone September 29 - paper

HONG KONG (Reuters) - Shanghai will launch its trial free trade zone (FTZ) on September 29, featuring liberalized foreign exchange and interest rates in the form of new financial products, the Securities Times said on Friday, quoting a local official.

Product-led reform in the free trade zone may pour cold water on investor expectations of an overall relaxation of restrictions on the capital account in the FTZ.

“It is definitely not what analysts imagined if they thought a liberalized environment will be offered first to let corporates compete and develop there,” Wang Xinkui, director of the city’s Counselor’s Office, said on the sidelines of an event held by OCBC Bank (China).

Wang said future reform in the free trade zone would likely produce a series of financial products. Once an innovation proved itself successful it could be more widely promoted in the zone.

Shanghai is pulling away as the clear winner in the race to set up free trade zones in mainland China, and a draft policy outlining reforms in the special zone is expected soon.

Beijing formally approved the establishment of a Shanghai FTZ in July and unconfirmed media reports have outlined initiatives targeting shipping, insurance, healthcare and auctions of “cultural relics”, among others.

Wang warned, however, that if corporates went to the free trade zone only to pursue short-term profits it could fail.

The FTZ will open just before a week-long holiday that starts on Oct 1.

Reporting by Michelle Chen; Editing by Anne Marie Roantree and Eric Meijer

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