China (Shanghai) Pilot Free Trade Zone: An Experiment In Economic Reform

However, ineffective policy enforcement has been a major issue in China, and the enforcement of patent laws is no exception.

As lawyers specialize in intellectual property practice, the FTZ can develop IP-related industries that may be lead to an increase in IP investment opportunities.

One of the most sheltered industries is China’s entertainment sector: foreign companies are prohibited from investing in radio or television stations, film companies, publishing companies, news websites, or online audio-visual programming, and are even barred from the online gaming industry.

This movement of money is the life-blood of every economy, which revolves around moving money from people who have it to people who need it.

Another substantial problem that is pointedly ignored is the stringent minimum capital and regulatory requirements for foreign commercial banks to establish as an incorporated subsidiary; both are very steep, encouraging only the largest foreign banks, with sufficient interests in China and the capital to survive the less than competitive environment, from entering the market.

Once liberalized, foreign banks will have an advantage over their domestic counterparts because of the broad experience foreign banks have in pricing risk into their rates, as well as their strengths of managing liquidity risks.[49] Consequently, foreign banks will be able to diversify by including interest rate risk management products.

The “Circular” allows FIEs to convert an unlimited percentage of its registered capital in foreign currency into RMB.

Applicable to deposits under $3 million USD by entities registered in the zone or by individuals employed in the FTZ for over a year, this reform denotes full liberalization of foreign currency deposit rates within Shanghai

One of the latest being the removal of interest rate ceilings on smaller foreign-currency deposits in the Shanghai Free Trade Zone

The establishment of a transparent legal system, simplification of the regulatory bodies, the reduction of capital controls and the interest rate liberalization are substantial, but necessary steps in terms of next steps.