Shanghai FTZ has inbuilt advantages

After the US lifted its embargo following former president Richard Nixon's visit to Beijing in 1972, China began learning from Western examples. The establishment of a series of special economic zones was part of the lesson China learned, which has now prompted it to set up the Shanghai free trade zone (FTZ).

The FTZ demonstrates China's determination to build Shanghai into a global economic hub. The FTZ is aimed at helping develop industries by promoting free and convenient trade, and acting as a transit point for trade. The zone is also expected to liberalize the service sector, including financial innovations like offshore financial services. In short, the Shanghai FTZ is expected to set an example for other Chinese cities on how to facilitate free, unfettered trade.

But people have to realize that the FTZ is not aimed at yielding short-term gains. This is important because after Premier Li Keqiang talked about the dividends of reform, many investors, especially in the financial and realty sectors, started speculating about making easy money thanks to the changes in regulations. Their dream of making easy money was even echoed by some media outlets, which construed that capital programs would be thrown open and the yuan would float freely in the FTZ.