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It is hoped in the Pearl River Delta that the second Chinese regional free trade zone (FTZ) to be approved, now that the first in Shanghai is operational, will be situated in its three main areas – the province of Guangdong, including Shenzhen, and the special administrative regions (SARs) of Hong Kong and Macau.
It has been reported that a feasibility study was submitted to China's State Council last month for approval, following the Government's indication that it wanted to speed up the establishment of further FTZs. The opinion has been expressed that the Government will look on the application favorably, as it would further integrate the economies of Hong Kong and Macau with the Mainland.
The FTZ would aim to decentralize government powers, cut customs clearance administration, and simplify business registration. It would focus on the liberalization and expansion of the trade in services between Guangdong and the SARs, particularly in financial products. It would, in particular, be an ideal area in which to test further moves to full renminbi (RMB) convertibility.
In fact, the setting up of the FTZ would strengthen moves that are already in existence in the Pearl River Delta. There has been considerable progress in financial co-operation within the area.
For example, the Qianhai special economic zone in Shenzhen, construction of which has begun and is expected to take eight years, is already being looked on as providing China with a testing ground for increasing cooperation between the Mainland and Hong Kong's service sector, and the development of products to open up China's capital market.
In addition to the many banks and fund managers with operations in both Guangdong and Hong Kong, consideration is also being given to the further expansion of cross-border RMB lending to other parts of Guangdong (including the special economic zones in Nansha and Hengqin). Support is to be given to Hong Kong insurance companies to set up operation in Guangdong, and to Guangdong enterprises to establish their captive insurers in Hong Kong.
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