Shenzhen OK'd to test freer use of yuan

But money market experts said the rate difference will lead to little arbitrage and few speculative opportunities. Qianhai's economy is too small, they explained, and financial firewalls will be put in place between the zone and the rest of the country.

There are 21 companies registered and 170 projects ready to start in the special zone, Xu Qin, mayor of Shenzhen, said last month. The government aims for Qianhai to have 150 billion yuan in GDP by 2020, according to the National Development and Reform Commission. Qualified companies in the zone will enjoy a corporate income tax rate of 15 percent, 10 percentage points lower than the normal rate.

The central government's consent for Shenzhen means the southern boomtown is once again exploring the road of reform for the rest of the country. Three decades ago, Shenzhen, which was then a remote fishing village, set a remarkable example in China's reform and opening-up, a policy that has led to China's fast economic growth in the past 30 years. Many policies have been tried out in Shenzhen and later introduced to other inland cities, such as Shanghai and Beijing.

Many believe Qianhai will be a competitor to Shanghai, which has said it wants to become a global financial hub by 2020. Lu Zhengwei, chief economist with Industrial Bank Co Ltd, disagreed.

He said Shanghai will be a partner of Qianhai and that many new measures will be tested in Shenzhen before being introduced in Shanghai.

In fact, the central government has already consented to Shanghai's plan to become a global center for yuan trade by 2015.

Qianhai-related stocks rallied on Wednesday. Shares of Shenzhen Development Bank Co Ltd, a commercial bank, gained 0.99 percent, or 0.15 yuan, to 15.28 yuan, amid a 0.4 percent drop in the Shenzhen Component Index. Shares of Shahe Industry Co Ltd, a Shenzhen-based developer, rose by the 10 percent allowed under a daily trading limit.

gaochangxin@chinadaily.com.cn