Shanghai FTZ can learn from HK experience

Hong Kong has been a free port for more than a century. Shanghai could learn a lot from Hong Kong on how to develop a free trade zone, especially its low taxation system, the rule of law and ways to attract foreign talent.

A free port, a shopping paradise, and the world's third largest financial hub.

As one of the most dynamic and prosperous cities in Asia, Hong Kong's success is not a coincidence.

The city's service-oriented economy is characterized by low taxation, near free port trade, and a well-established international financial market.

"In HK, the trade tariff is essentially zero, except for some special goods. The salary tax in HK is low. The capital gains tax is also low. " Said professor Francis Liu, from HK Univ. of Science and Technology.

Another key factor for Hong Kong's thriving business is its sound legal system.

Hong Kong's rule of law follows the Anglo-American legal system, which is based on case law. Analysts say the system can fully protect contracts and private possessions.

"Hong Kong's rule of law is considered very important for the international investors. It can provide great sense of stability and certainty to the investors. But what happen in Shanghai's free trade zone is mainly due to the policy changers. Then people may be concerned about what would happen in the future." Said professor Francis Liu, from HK Univ. of Science and Technology.

Hong Kong is also ahead of Shanghai in attracting foreign talent. The city has a number of "pull factors" to entice highly skilled immigrants. These include excellent work opportunities, good pay, a low tax rate and relatively simple visa application procedures. The larger the pool of talent, the easier it is to attract investment.

"Hong Kong is a center of excellence where people want to live. We must really encourage skilled people in other countries and regions, including the mainland, to live in HK. We must have the best and most efficient business infrastructure, the friendly business and tax environment, and also the international connectivity, so that people want to be here." Said Chan Ka-Keung, from HKSAR Financial Service and Treasury Sec.

Hong Kong has been a free port for more than a hundred years. Its favourable tax system, efficient government, free flow of capital and independent judiciary all make it attractive. As a gateway to China and the outside, many believe Hong Kong will continue play a big role in the future.

"As a free port, Hong Kong is thriving on free trade. And this sets a good example for Shanghai to establish the free trade zone. But with mounting challenges coming from home and abroad, Hong Kong also needs to step up efforts to maintain its competitiveness."