'Zero tolerance' for financial reform risks at FTZ: Shanghai Party chief

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'Zero tolerance' for financial reform risks at FTZ: Shanghai Party chief

(Xinhua) 08:38, November 07, 2013

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SHANGHAI, Nov. 7 (Xinhua) -- No systematic and regional risks from financial reforms at China's first experimental free trade zone (FTZ) will be allowed, a top Shanghai official said in a recent interview.

Han Zheng, the Communist Party chief of Shanghai, told Xinhua that the financial reforms and innovations at the FTZ should be carried out under the premise of controllable risk.

"We have zero tolerance for systematic and regional risks," Han said.

As the outpost for China's new round of reforms, the Shanghai FTZ, which was launched on Sept. 29, will test full convertibility of China's currency, the Renminbi, its use across national borders and liberalized interest rates as part of the financial reform package.

Han said all financial reforms and innovations should be compatible with the country's economic development level and the international status of the Chinese currency. Meanwhile, the reforms should always serve the real economy to elevate China's competitiveness in the world arena, Han added.

He said the country's top banking, securities and insurance watchdogs have released supporting measures regarding the establishment of the FTZ, but a detailed plan from the central bank, the People's Bank of China, has yet to come.

"The detailed plans on the financial reforms (in the zone) will be worked out by the central government, and the Shanghai government will mainly work with the central government for their implementation," said Dai Haibo, deputy director of the FTZ's administrative committee.

Dai said his committee is working with regulatory and supervising authorities to speed up building a capital monitoring system and helping banks establish an enterprise database.

Within one month after its opening, 213 Chinese enterprises and 21 foreign-funded enterprises have been approved to set up businesses in the zone, while over 1,500 other companies are on the waiting list, according to figures from the city's industrial and commercial department.

Han said he was satisfied with the outcomes of the FTZ over the last month, as all pre-set goals have been achieved and the initial reforms have been steadily carried out and substantially implemented.

"We feel the responsibility and pressure brought by the building of the Shanghai FTZ, but we are target-oriented and all the more confident," Han said.

According to an overall plan released by the State Council, China's cabinet, the Shanghai FTZ will test institutional innovations in four areas: investment, trade, finance and comprehensive supervision.

A "negative list" mechanism as well as business registration reform, which have been implemented in the area of investment, have proved to be effective.

Investors can have all their licenses processed within four working days, a sharp contrast with the 29 days that used to be required for the procedure.

On Sept. 30, the FTZ's administrative commission published a "negative list" of 190 restrictions limiting foreign investment in sectors such as banking, insurance and the hospitality industry.

Han said although the negative list seems a bit too long, the restrictions are very detailed, accounting for only 17 percent of the industry categories and leaving much room for opening up.

"It's like managing a building. If you seal the main gate, the whole building will be cut off. What we are doing now is actually shutting a small portion of the rooms in the building," Han said.

Even so, the negative list will be further shortened, according to Ai Baojun, head of the FTZ's administrative committee.

Ai said the list is only applicable for the year 2013. "We have already started to work on the 2014 version, and the list will be improved and shortened," Ai said.

Han said the goal of the pilot zone is for long-term development rather than partial experiments.

"The reforms at the FTZ will be centered on institutional innovations," Han said.

He stressed that all reforms tested at the FTZ should be replicable and the measures should be promoted nationwide.