The zone is located on a 29-square-kilometer patch of land on the
outskirts of Shanghai. At its core, the zone is a tax-free trading hub,
but it was also supposed to attract foreign investment and introduce
currency reforms that would make the yuan a viable alternative to the
dollar and the euro. While the project is thought to still
enjoy the support of Beijing, reforms have been slow to materialize. On
the thorny issues of how to loosen capital controls and liberalize
interest rates, almost no progress has been made.
There are no signs that the Shanghai FTZ has changed China's economy in the way that the "special economic zones" pioneered more than 30 years ago changing the country's trajectory.The zone was supposed to introduce currency reforms that would make the yuan a viable alternative to the dollar and the euro.
The Shanghai Free Trade Zone has only been in operation since September 29, 2013. Dismissing it as a dud at this juncture would be premature. It takes some time for industries to take advantage of the opportunities presented by free trade zones. Setting up new businesses, even with a minimum of government interference, may still require construction, remodeling, and hiring. Time will tell whether the Shanghai Free Trade Zone has been a success, but it's too early to conclude that it has failed.
The Shanghai Free Trade Zone (SFTZ) was established as a means of economic reform in China. While all of the goals have not been realized at this point, the SFTZ has only been in place for approximately a years' time. To classify the effort as a dud would mean the overall goals will never be realized. Economists would do well to continue exploring its shortfalls and work to continually improve those aspects while continuing to capitalize on its successes. Expecting such a major reform to have complete success in such a short amount of time will only guarantee it being revered as a failure.