Shanghai Free-Trade Zone Entices Foreigners, Raises Land Prices

China's official news agency, Xinhua, reported on Tuesday that Shanghai would open up its planned Free-Trade Zone on September 29. The roughly 29 square kilometer area in Shanghai will be exempt from trade barriers and censorship rules that affect all parts of China outside of its Special Economic Zones. The ridding of mandated customs inspections of all imports and exports aims to boost trade volume and attract foreign investment in China's most populous city.

The most attention-grabbing quality of the new Free-Trade Zone is the lifting of internet censorship bans on Facebook, Twitter, and The New York Times, allowing unrestricted access to these sites only within the small zone in the city. The new policy aims to attract foreign firms to spur local banking, insurance, shipping, and healthcare industries, among others. “In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home,” stated an anonymous Chinese government official.

One consequence of this announcement is a surge in home prices around the Free-Trade Zone. Real estate prices in Gaoqiao, a residential area near the new zone, jumped as sales soared 50% in just two weeks at the beginning of September. Since the original plans for the Free-Trade Zone were announced earlier in the year, real estate prices had already risen roughly 8% in the area.

Shanghai’s move to attract foreign firms is seen as a modern application of Deng Xiaoping’s principle of “Reforming and Opening Up” which showed much success in cities like Shenzhen. The entry of foreign firm into Shanghai’s local market will spur competition and innovation in the 19 industries the zone plans to deregulate, and it will lay essential groundwork for further deregulation of trade and free exchange of the Yuan in China.

-Mitch Lagrasta


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