The main reason for China’s government to start the Shanghai Free Trade Zone last weekend was to increase competitiveness in the service sector, where in telecom and finance state-owned giants have been dominating up to now, tells Shanghai-based business analyst Shaun Rein on Radio Australia.
Shaun Rein, Managing Director of the Shanghai-based China Market Research Group, believes it’s being set up to address problems in country’s economy.
“China’s economy is in a difficult situation right now. In the past five years, far too much of it has been based on heavy investment in infrastructure, such as airports and subways,” Mr Rein said.
“The government is now trying to create a more sustainable economy that’s based on services, higher value added manufacturing and consumption.
“So the Shanghai Free Trade zone is really a great case point where the government is trying to attract higher value added foreign direct investment, to increase competitiveness in the service industry, and really hoping to get China’s economy to lean towards a more sustainable level of growth.”
Mr Rein says tax incentives and the potential to tap into some of China’s state-controlled industries will be the main lure for foreign companies.
“So for instance, there’s a lot of rumours that the government will allow foreign telecom companies and financial services firms a lot more operating room within this free trade zone.
“That’s really important because right now the telephone and financial services sector in China are controlled by old, stodgy state-owned enterprises, where the innovation and the service is really lagging,” Mr Rein said.
“And it’s hurting the worker and the productivity of the Chinese people.”
Last Sunday China opened its Shanghai Free Trade Zone. At the China Weekly Hangout of October 3 we will explore some of the directions of China’s new policies, despite a huge amount of ambiguity in the current rules. You can read our initial announcement here, or register here for the event.
China’s internet companies are mostly private firms, and not surprisingly more active in developing a global strategy. Should Facebook, Twitter and Google+ worry now Tencent, Baidu, Sina, Alibaba and Xiaomi have plans to expand globally, the China Weekly Hangout asked on September 5. Not yet, said investor William Yung, media-expert Paul Fox and Tech-in-Asia editor Steven Millward. Well, maybe Whatsapp should. Moderation by Fons Tuinstra of the China Speakers Bureau.