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China to Expand Shanghai Free Trade Zone and Add New Stock Market

November 6, 2018

In a major boost for Shanghai investors, on November 5 President Xi of China announced plans to expand the region’s free-trade zone and create a startup-focused new financial market.

Shanghai Pudong skyline at night.

The city of Shanghai, which the People’s Republic of China had actively encouraged to develop as a diverse economic center with a planned intent to rival Hong Kong, has seen more stagnating growth of late, so the new plans for the region are most welcome.

President Xi made his comments during the China International Import Expo 2018 show, currently taking place from November 5-10 at Shanghai’s National Exhibition and Convention Center. In the talk, Xi did not give details about where the expanded FTZ would be located or precisely how much larger it would be.

When Shanghai’s Free Trade Zone was first set up in 2013 it was initially authorized for 28.78 square kilometers of space. In 2015 the zone expanded over 4 times as large, to 120 square kilometers, despite that Shanghai had not exactly grown its economic fortunes as fast as the country had hoped.

Shanghai’s FTZ was envisioned – and has become, to some extent – a Hong Kong – like free marketplace with easy cross-border trading and money fund flows, all designed to help drive business development in the area. It was also intended as a model which, once stable and some of the challenges of the FTZ worked out, could be replicated in other areas within the country.

Despite the region not have expanded as the country had hoped, Shanghai and its investors have kept pushing at what they see as high potential growth for the region. Xi’s comments about expanding the FTZ should lay to rest any immediate concerns that China’s backing for it is faltering.

As to plans for the new FTZ, Xi spoke of turning the adjacent Hongqiao area into an international medical center, and opening up the region to foreign investment. Xi spoke of hopes to bring in top hospital chains and key personnel from around the world, to further strengthen that new focus area.

Besides expanding the FTZ, President Xi also called for setting up a new specialized stock market, to help technology startup companies raise capital locally – and keep them growing. This is consistent with other statements the country’s leadership has made about doing whatever it takes to have their country take the lead in multiple new economic segments.

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