Today, let us consider yet another overhyped entity that is somewhat larger in scale. Try the largest city in the world's largest country--Shanghai, People's Republic of China--boasting a population of an astonishing 23 million. Just yesterday, a 29 square mile chunk of it formally became the Shanghai Free Trade Zone, but no one is entirely sure what this means. Hong Kong billionaire Li Ka-Shing said it may in time overtake Hong Kong as its economic openness--in banking and other services as well as with a more freely traded yuan--would attract more FDI from elsewhere. Yet, for something so highly touted, how Shanghai will achieve this "world capital" status remain unclear even now after its official launch date:
Well, that’s the plan, at least. The government has so far been clear in its intention to introduce financial reforms in the zone, but not as clear on how they will actually take place. The details on what can and cannot be done there, and when certain reforms will be implemented, remain sketchy. The reforms planned for this Shanghai zone will be much more difficult than those that took place in the trade- and manufacturing-focused zones of yesteryear. Factories, and the shirts, shoes and TV sets they make, are easy to monitor and control; not so financial flows, which could surge in and out of the zone with destabilizing speed. Financial firms could also take advantage of different interest rates and currency values inside and outside the zone to turn a quick buck.