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Friday, February 21, 2014, 11:06
Focus HK: FTZ to assist in yuan convertibility
By Lin Jing

Focus HK: FTZ to assist in yuan convertibility

Another Free Trade Zone (FTZ) is expected on the mainland before the end of this year, with broader, more diversified and bigger opportunities for Hong Kong’s economic future, than Shanghai’s ambitious FTZ. Lin Jing reports.

The proposed Guangdong free trade zone, officially, the Guangdong-Hong Kong-Macao free trade zone, will cover four areas of Guangdong: the Nansha district of Guangzhou, the Qianhai district of Shenzhen, the Hengqin district of Zhuhai and Baiyun Airport in Guangzhou, together with Hong Kong and Macao.

Proposals for this 931 square kilometer development focus on the creation of international centers for six core industries, including manufacturing, logistics and trade. Renminbi (RMB) settlement and products are also meant to play a major role in this second FTZ.

The Guangdong development proposal went to the State Council in mid-December. Officials in Guangdong are confident it will be approved before the end of the year.

Zhu Xiaodan, governor of Guangdong, talks about the government’s dedicated effort — investing over six months of preparation into the FTZ proposal. The studies included approaches to opening up the economy and making the best possible use of geographic advantages.

Zhu told the Guangdong Provincial People’s Congress’ annual plenum in January, that the principal task for 2014 is to advance financial sector cooperation with Hong Kong, keep the FTZ application moving apace and to promote RMB convertibility under capital account items, allowing for financial assets to be transferred into foreign assets on an exchange basis.

On Jan 29, a joint meeting framework led by the National Development and Reform Commission was established to solve communication and coordination issues during implementation. The meeting framework is considered an important step toward establishment of the FTZ.

The long-term benefits extending to Hong Kong from the project are incalculable.

Nicolas Kwan, director of research, at the Hong Kong Trade Development Council (HKTDC), is enthusiastic about the project and what it means for Hong Kong.

“The more FTZs on the Chinese mainland, the better for Hong Kong,” said Kwan.

“When doing business or investing in the mainland, what Hong Kong companies worry about most is the lack of a legal framework and the unsatisfactory business environment,” he said. “Hong Kong is expecting the FTZ to create breakthroughs in those key financial, economic and legal areas.”

As long as China maintains its global connections and embraces international trade, there will be more opportunities for Hong Kong, he said.

Closer ties

Economic integration and cooperation between Hong Kong and Guangdong have progressed steadily over the past 10 years.

CEPA, the Closer Economic Partnership Arrangement was signed in 2003, opening the mainland’s huge market to Hong Kong and promising stable economic growth.

“In the past 10 years, Guangdong, Hong Kong and Macao have been good partners in finance and international trade,” said Liu Wentong, director general of the financial affairs office in Guangdong province.

Official data shows Guangdong with a GDP over 6.23 trillion yuan ($1.03 trillion) in 2013, up 8.5 percent from 2012, making it the first province in China to exceed an annual GDP of 6 trillion yuan.

Foreign trade volume surpassed $1 trillion in 2013, accounting for more than 25 percent of the nation’s total, and representing a 10.9 percent increase over 2012.

Guangdong’s 2012 exports amounted to $574.1 billion, with Hong Kong continuing to hold on to top spot as the province’s largest export market, accounting for 38.3 percent of the total.

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