(China Alert) Shanghai FTZ reform: All eyes on 2Q16

·PBoC is leading FTZ reforms in Shanghai
·The Shanghai FTZ to be epicenter of China market access
·An understanding of reform direction is now vital for planning

Update: The Shanghai FTZ was front and center in late-October proposals from PBoC which constructed a framework that will bring Shanghai in line with peers as a global financial center. Shanghai has already set up the required infrastructure for financial activities in the form of Free Trade Accounts (FTAs). Outbound investment reforms via these accounts create wealth management opportunities for both foreign and domestic firms, most notably by funneling trading from the new FTZ-exclusive QDII2 program. Inbound investment reforms may be set to further internationalize Shanghai’s capital markets by giving foreign firms further channels in addition to QFII, RQFII and the Connect. Z-Ben Advisors believes these long-promised (and, arguably, long-delayed) FTZ financial industry reforms could be implemented – accompanied by detailed regulatory and business-level guidance – as early as 2Q16. As foreign firms step up their pace at which they build sales and servicing centers on the Mainland, the FTZ is now becoming the default choice for these centers’ location.

PBoC’s proposals, which we believe are more likely than not to be implemented with little change by 2Q16, accelerate the arrival of long-planned objectives for the Shanghai FTZ. Since it came online in 2013, the zone’s focus on commercial banking activity has, arguably, been……

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