New measures aiming to transform Shenzhen into a financial and technology hub that attracts foreign investment and talent were unveiled on Sunday, giving the special economic zone greater autonomy and flexibility to pilot reforms.
But whether these measures will be enough to turn Shenzhen into a global financial hub that will rival or even overtake Hong Kong remains questionable, said Hong Kong economist Law Ka-chung.
Forty changes announced by the National Development and Reform Commission included pilot projects to allow some companies listed abroad, such as tech giants Tencent, Xiaomi and Alibaba, to issue shares or Chinese depositary receipts, so that they can also list in Shenzhen.
Proposals to relax foreign investment in the communications industry and visa approval for foreign talent were also tabled.
The new measures appeared to have emerged amid the ongoing trade war between China and the United States, said Law, a former chief economist at the Bank of Communications and an adjunct professor at City University.
The trade war has prompted more Chinese companies to withdraw from the U.S. market, Law said, which could explain the proposed launch of a CDR pilot scheme in Shenzhen. “These companies don’t have that many options. They can only choose either Hong Kong or Shenzhen,” he said, adding that while the launch of the pilot project in Shenzhen could happen very quickly under the order of national leaders, “to attract foreign investment, it is difficult.”
On the relaxation of foreign investment in the communications industry, which has always been seen as an important strategic industry, Law questioned whether the proposal would only be “a mirage to lure foreign money in.”
The relaxation of visas might not be of much appeal as the past year saw many foreigners working in China being detained, and more and more senior management of foreign companies have already left the country, Law said. The current political and economic conditions are not appealing to foreigners, he added.
Another proposal covers the reform of state-owned companies in Shenzhen by linking salaries of senior management with company performance. However, the state’s interference in the market for SOEs will make this difficult to execute, Law said.
“State-owned companies are led by politics. They are told not to do business with foreigners when there is a trade war, even though there is business out there. How can you ensure the company’s performance?” he said.
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