A new regulation, expected to be approved by the Chinese government, will soon give foreign investors a rather easier way to bring money into the free-trade zone (FTZ) in Shanghai.
The People's Bank of China, China's central bank, said the new regulation will also allow Chinese residents to utilize the FTZ in Shanghai as a base for overseas investments.
The central bank is set to loosen restrictions on investment flows that apply elsewhere in the country. Analysts said the new move by the central bank will further entice foreign investors who want to tap into China's massive financial sector.
However, the central bank clarified that it will strictly monitor the flow of money in and out of the FTZ to ensure that the zone will not be used as a backdoor to circumvent the financial restrictions throughout China.
In fact, a latest FTZ blueprint showed that a wall will be built around the Shanghai Free Trade Zone in order to prevent money from getting out of the zone and into the different parts of the country.
The central bank also did not offer a timeline for the proposed loosening of rules at the FTZ although it assured that reform and innovation will be carried out in the zone.
Just within two months since its launch, the Shanghai FTZ has been attracting investors from around the world. According to the administrative committee of the FTZ, a total of 1,434 firms have registered in the zone, comprising 38 foreign-funded and 1,396 domestically funded.
On average, the registered capital of foreign firms in the zone is USD15 million while local firms have average registered capital of about USD4.07 million.
Although the number of foreign-funded investors is only less than three per cent of the registered firms in the zone, officials dismissed insinuations that the zone had been a disappointing start.
Authorities said several foreign firms have shown interest in setting up offices in the zone and company officials have been visiting the FTZ.
Dai Habo, the deputy director of the committee said the Shanghai FTZ has continued to inspire people to become entrepreneurs.