As the Government’s latest effort to push forward economic reform, a free-trade zone in Waigaoqiao, Shanghai, has been set up to adopt a more active opening-up strategy. The new zone covers 29 square kilometers and includes 4 existing bonded zones: Waigaoqiao bonded zone and logistics park, Pudong airport zone, and Yangshan port zone.
The proposed new zone was approved in August and officially launched in September. The State Council said the new free-trade zone will be used as a testing ground for “bold financial reforms”, including relaxed restrictions on foreign direct investment, liberalised interest rates, freer yuan convertibility, as well as to open up its largely sheltered services sector to foreign competitions. No specific timeline or plans regarding when and how the reforms will be carried out have been given, but the State Council said these should be within two to three years.
While the spotlight has been on the financial reforms, the Government has also highlighted five other key industries for the free-trade zone, including shipping and logistics, commercial trade, professional services such as law and construction, culture and entertainment, and social services.
Although no concrete plans or timelines have been given by now, home-buying activity in nearby districts surrounding the newly-established zone has already been heating up by investment demand. Average property price in these districts has soared more than 20% over the past two months, as both home buyers and sellers have higher expectations of future home price appreciation. According to market news, average home price in Gaoqiao has surged nearly 30% to about RMB22,000 per square meters, with sales in the district climbing up 50% year-on-year.
Office rents in the new free-trade zone have also been pushed up by the increasing demand from companies who rush to register in the area. The first batch of 25 foreign and Chinese companies were granted licenses to register in the zone. Meanwhile, 11 financial institutions, including HSBC, Citigroup, Bank of China and Deutsche Bank, have also won approval to set up a sub-branch in the region. Average asking rents in some office buildings in the district has reached RMB 126 per month, up over 100% compared with that in July.
The inauguration of the new zone has also encouraged developers to invest more in the office market. A Xujiahuai commercial site, the last large land plot at the heart of the City which could yield 584,200 square meters, was sold to Sun Hung Kai Properties for RMB 21.7 billion in September, marking the highest land price in the City in terms of its total value. Taking construction costs and interest expenses into account, the total investment amount could be over RMB 40 billion, representing the developer’s biggest commercial development in China