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Australia turning to Shanghai for free trade therapy

English.news.cn   2014-01-09 09:35:17            

Christian Edwards

SYDNEY, Jan. 9 (Xinhua) -- After nine years of intractable negotiations, the failure to secure a free trade pact between China and Australia looks likely to become a big win for the three- month-old Shanghai Free Trade Zone (FTZ), with major Australian bank Westpac the latest to urge Australian business back to China.

Andrew Whitford, Westpac's head of Greater China, told local media this week that Australian companies seeking genuine access in China would enjoy enormous benefits from establishing a foothold in the Shanghai FTZ.

"I see companies that are involved in agriculture or companies that are involved in hard commodities that set up in the free trade zone would have enormous opportunities," Whitford told the Australian Financial Review on Thursday.

The Shanghai FTZ opened in late September and its experimental mantra will see 18 mainly services based industries (the majority of which are services based financial, shipping, business, professional, cultural and social), explore commerce with groundbreaking tools from the liberalization of interest rates, RMB convertibility and more liberal foreign investment criteria.

However, it was the December announcement that foreign companies in the FTZ will be empowered to issue yuan-denominated bonds for repatriation that really ignited local interest.

"As a foreign company setting up in the free trade zone, it is going to be a lot easier to be able to raise funds. Foreign companies will be able to issue RMB bonds and repatriate the funds back offshore or put the funds onshore into China.

"That is a major concession and a major change. That is a significant step forward," Whitford said.

Westpac, Australia's second-biggest bank by market value, and one of the country's four pillar banks (the Big Four), has long held interests in China, having established itself in Hong Kong in 1997 with branches today in Shanghai and Beijing.

Sydney-based entrepreneur and BRIC expert David Thomas told Xinhua that the full convertibility of the Chines currency in the FTZ will allow foreign companies to raise capital through derivatives trading or private share placements.

"A huge step forward for the local financial services industry. "

Thomas said that Australian supporters of the new FTZ are regarding it as an alternative to just sitting and waiting for a free trade deal to materialize.

While bilateral trade between China and Australia stood at 122. 3 billion U.S. dollars in 2012, the stale taste of almost 10 years of free trade talks has stifled economic integration.

The Shanghai FTZ pilot scheme is now being considered by many of Thomas'clients as a "momentous step away from China's export- led growth model, to a more sustainable and liberalized consumer- led growth model."

In the next five years, the Shanghai FTZ is expected to contribute between 0.1 percent to 0.75 percent to China's annual GDP and concurrently, provide a new model to attract foreign investment which can be applied to other cities and provinces.

Thomas said that as China had begun to foster domestic growth, it would be crucial for its services-based industries to both develop and mature to be able to compete on the world stage.

"Looking further forward, the Shanghai FTZ will also stimulate a fresh wave of investment and infrastructure spending, which will offer a wide range of opportunities for Australian businesses," he said.

Despite the cheerleading, Westpac is yet to set up shop in the FTZ, while its direct competitor in China of Australia's Big Four Banks, the Australia New Zealand Banking Group Ltd (ANZ) has already announced preparatory approval from the China Banking Regulatory Commission (CBRC).

From Whitford's view there is no rush.

Westpac, with strong footholds in Beijing, Shanghai and Hong Kong, has had a very good Christmas - reveling in record profits ( 6.8 billion Australian dollars up 14 per cent from 2012) and basking in widely-held expectations that the Australian banking sector will deliver more earnings growth in 2014.

"From Westpac's perspective, I have a watching brief on the free trade zone," Whitford said.

"I am spending a lot of time on it...and from where I am sitting and everything I am hearing, to me it is going to be an opportunity that most banks who are actively participating in the Australia-China market will probably want to be involved in."

Related:

FTZ-linked counters help index snap losses

BEIJING, Jan. 8 (Xinhuanet) -- Shanghai’s key stock index yesterday snapped a three-day losing streak to edge up after being bolstered by shares related to the city’s free trade zone after the central government unveiled a decision to further liberalize foreign investment regulations in the zone.

The Shanghai Composite Index added 0.08 percent, or 1.61 points, to 2,047.32. Full story

 

Editor: Fu Peng
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