Different roles

Chen Bingcai, researcher at Beijing-based Chinese Academy of Governance, believes Shanghai and Hong Kong have different strategic orientations and may compete with each other for offshore business.

Shanghai will mainly serve domestic enterprises while Hong Kong is the well-established launch pad for international capital to enter the mainland. The aim of the Shanghai FTZ is not to compete with Hong Kong, but to reach international standards in terms of convenience of investment and trade, free currency exchange, efficient supervision and a sound legal environment, Chen said.

Nationally, the FTZ is seen as a testing ground for new policies and reform. It will take the lead in driving growth in the Yangtze River Delta and the entire nation, he added.

He Wen, a researcher with the Shanghai Institute of East Asia Studies, said the FTZ is a must for the mainland based on its developmental trajectory. Shanghai and Hong Kong complement each other. Shanghai is playing catch up, lagging far behind Hong Kong in terms of development.

The “one country, two systems” principle is Hong Kong’s biggest advantage.

You Anshan, head of research on Hong Kong and Macao affairs at the Shanghai Academy of Social Sciences, compared Shanghai to a newborn baby with a lot to learn from Hong Kong, saying that under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), Hong Kong will embrace opportunities for common development in the FTZ.

Shen Minggao, Citibank’s chief economist for China, said at a recent forum that the FTZ is a significant aspect of China’s reforms, and sustainable development of the mainland economy is the biggest bonus for Hong Kong.

Profitable competition

The competition between Shanghai and Hong Kong is inevitable but not necessarily a bad thing, unless Hong Kong is worried about its own competitive strength or lacks confidence in its innovation capacity, he said. There are divisions of financial functions between Shanghai and Hong Kong.

The FTZ is a feature of opening-up, while Hong Kong needs to become more integrated with the Pearl River Delta to benefit from domestic economic reform. In this sense, Hong Kong has plenty to do in the future, Shen added.

For instance, many believe that internationalization of the yuan is the biggest opportunity for Hong Kong.