Guangdong-Hong Kong FTZ reportedly gets green light
13 May 2014
The overall plan for the Guangdong-Hong Kong-Macau Free Trade Zone (FTZ) is reportedly in its fine-tuning stage. According to mainland media reports, the FTZ has been initially approved by the central government after seeking the opinions of 28 ministries and commissions. The proposal plans to set up an independent negative list for Hong Kong and Macau and will put primary focus on the development of cross-border RMB business while promoting financial innovations.
The biggest characteristic of the Guangdong-Hong Kong-Macau FTZ, which sets it apart from the Shanghai FTZ, is that the three areas will deepen cooperation to increase the region's competitiveness. The exact time of its establishment will depend on the central authorities.
Compared with the all-round opening and innovation of the Shanghai FTZ, the proposed FTZ puts greater emphasis on Guangdong's economic ties with Hong Kong and Macau.
In terms of financial innovations, the proposed FTZ will have more room for financial cooperation because Hong Kong is an international financial centre. Take cross-border two-way lending, for example. RMB capital mainly flows into Hong Kong and Macau at present. The proposed FTZ will encourage the flow of RMB back to the mainland to support its economic development, which is a win-win move as it will consolidate Hong Kong's position as an RMB offshore centre while supporting Guangdong's transformation and upgrade.
The financial innovations of the proposed FTZ will focus on the cross-border use of RMB and the building of offshore and onshore RMB centres. On the one hand, efforts will be made to make use of Hong Kong's position as a platform for RMB internationalisation to give Guangdong's rich financial capital a leg up in "going out" for greenfield investment, mergers and securities investment and widen the channels for RMB business abroad. On the other hand, joint efforts will be made to develop new RMB investment products, guide offshore RMB resources to serve Guangdong's economic development, and improve the mechanism for channelling RMB back to China.
Separate negative lists will be set up for Hong Kong and Macau under the framework of the Closer Economic Partnership Arrangement (CEPA), but they will be much shorter than that of the Shanghai FTZ for regulating international investment to reflect the degree of opening to Hong Kong and Macau.
Guangdong indicated that it would hasten its application for permission to establish the FTZ and consider adopting an approach that combines pre-establishment national treatment and the negative list management. As an initial step, it plans to basically achieve the liberalisation of service trades, deepen capital market cooperation, support the establishment of joint-venture securities companies, and strive to seek green light for overseas investment by qualified domestic individual investors on a trial basis.
- Mainland China
- Mainland China