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The Shanghai Free Trade Zone was never that free—and might be corrupt

Reuters/Aly Song
But what's being traded?
  • Josh Horwitz
By Josh Horwitz

Asia Correspondent

Published This article is more than 2 years old.

One of China’s most puzzling projects could soon implode, to the sounds of a familiar tune—corruption charges.

Ai Baojun, the vice mayor of Shanghai, is under investigation for “severe disciplinary violations,” according to the website for Central Commission for disciplinary inspection, China’s watchdog bureau. AFP reports that his name has disappeared from the website of the Shanghai government, indicating that Ai’s career as a political figure could soon come to an end.

Ai Baojun was also the director of the Shanghai Free Trade Zone—a pilot project that was announced in September 2013 and met with equal parts excitement and confusion. In addition to promising waived duties on imported goods and streamlined procedures for registering foreign businesses, Shanghai authorities hinted that wholly-owned foreign banks could use the area as a springboard to invest in the country’s public markets, or fund industries like health care or logistics, which have typically remained off-limits to outsiders. But specifics how these plans might get implemented remained unclear.

Perhaps for that reason, the Shanghai Free Trade Zone hasn’t done much yet to boost free trade. In a survey conducted in March by the American Chamber of Commerce in Shanghai, 45% of respondents said there was a lack of credible information (pdf, pg 26) available about the zone. Seventy-five percent of respondents said the zone offered no tangible benefits to their business.

Ai’s investigation is not the first of its kind to affect the Shanghai Free Trade Zone. Last March, deputy director Dai Haibo was removed from his position for allegedly engaging in graft. It is possible the zone’s stagnation originates from a deep-seated rivalry in China’s Communist Party—President Xi Jinping, who has spearheaded sweeping corruption probes since taking office, is thought to be a political enemy of former head of state Jiang Zemin. They both grew their power bases from Shanghai early in their careers

None of this bodes well for the future of the Shanghai Free Trade Zone—whatever that may have been.

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