A view of the Qianhai Free Trade Zone in Shenzhen, South China's Guangdong Province in 2018 Photo: IC

South China's Shenzhen is stretching arms out wider to Hong Kong and Macao investors by rolling out new legislation for its free trade zone (FTZ) that looks to scrap all market access restrictions on investment from the two cities, a move experts said will be highly appealing to Hong Kong and Macao investors who are increasingly interested in mainland markets as the pandemic wanes and the yuan strengthens. 

The new regulations for the Shenzhen Qianhai & Shekou Free Trade Zone, China's first FTZ law which will take effect on October 1, will "explore the possibilities" of canceling market access restrictions on Hong Kong and Macao companies that invest in the FTZ. It will also push a negative list management model for cross-border services trade from Hong Kong and Macao. 

The legislation also encourages Hong Kong and Macao enterprises to set up offices in the FTZ, with detailed regulations on such "cross-border offices" to be formulated later. 

Besides, medicines (excluding vaccines) and medical appliances that have been approved for sale in Hong Kong and Macao but have not been registered in mainland are allowed to be used in medical institutions in the Qianhai & Shekou FTZ for urgent clinical purposes.  

Lin Jiang, a professor of economics at Lingnan University College of Sun Yat-sen University, said that Shenzhen has sent out a clear signal of welcome to Hong Kong and Macao enterprises by establishing a business-friendly regulatory environment. 

This will be of great attraction to Hong Kong and Macao companies who are already itching to enter the mainland markets. 

"Particularly for Hong Kong companies, they are now being increasingly attracted by Shenzhen's innovative environment, the manufacturing resources in the Pearl River Delta region and a strengthening yuan, while the new national security legislation has enhanced their confidence in such investment," Lin told the Global Times. 

He also noted that the new legislation will broaden the scope of cooperation between Shenzhen and Hong Kong/Macao, likely into medical or high-tech sectors, from just traditional financial cooperation.

However, he also noted that there are some doubts that have hindered the inflows of overseas capital into Shenzhen, such as whether foreign currency exchange can be smooth and if the negative list for services trade sectors will be too long.