China plans to allow unfettered exchange of its yuan currency in its first free trade zone in Shanghai/AFP
China will allow unfettered exchange of its yuan currency in its first free-trade zone (FTZ), according to draft plans revealed exclusively by AFP this month, in a bold push to reform the world’s second largest economy.
The proposals showed the new Shanghai FTZ as an international trade and financial centre, which analysts say would challenge the free economy of Hong Kong.
“It (the FTZ) will have a big impact on Hong Kong,” Li said. “The free convertibility of the yuan will be favourable in the development of Shanghai.”
“If Hong Kong does not catch up, it will lag behind others,” he added, saying that Hong Kong’s GDP is already lower than that of rival Singapore.
When asked if Shanghai could rival Hong Kong within five to 10 years, he said: “I do not want to predict. But it will be faster than most people expect.”
Li, 85, also warned that the Hong Kong pro-democracy movement Occupy Central could harm the city’s economy, adding that it would “affect Hong Kong’s image as an international finance centre”.
After starting out in business as a plastic flower-maker, Li now commands a vast empire through Cheung Kong Holdings and Hutchison Whampoa, with global assets in property, telecoms, utilities, ports and retail.
He has a net worth of around $31 billion, according to Forbes magazine.
Reports that he is selling his Hong Kong-based supermarket chain ParknShop, have triggered fears he is going to pull his businesses out of the city, although he has pledged not to leave.
“I love Hong Kong, I love the country. Cheung Kong and Hutchison Whampoa won’t be moved away from Hong Kong,” he said at a press lunch on Tuesday and confirmed by his office Wednesday.
The draft FTZ plan for Shanghai shows it would support the establishment of foreign and joint venture banks and welcome privately funded financial institutions.
At present, China’s banking sector is overwhelmingly dominated by state-run institutions.
Hong Kong promotes itself as the business gateway to the world’s second-largest economy but is facing challenges such as high labour and rental costs.
“In one to three years’ time, if Hong Kong cannot revamp itself, it will lose its competitiveness to the trade zone,” chief China economist of ANZ Banking Group, Liu Ligang, told AFP after the scale of the plans was revealed.
