​The report cited anonymous insider sources saying that the government will implement preferential policies related to the taxation of assets in the free trade zone, without giving further detail.

“This should attract foreign and domestic companies to the zone, and at the same time reduce their cash flow burdens,” the report said.

However, the report went on to quote other officials specifically denying rumours in circulation that the zone would feature a 15 percent corporate income tax rate, instead of the current 25 percent rate for ordinary enterprises.

Mainland firms expected to benefit from the construction and operation of the zone have seen their valuations juiced in recent weeks by a steady drumbeat of leaked policy drafts and insider speculation describing proposed policy changes and industrial policies in the FTZ. These have ranged from deep changes to the way financial markets will operate in the zone to more minor industrial policies related to video game consoles and “cultural relic” auctions.

However, the government has yet to formally commmit to any of the policies or set out a timeline. Multiple regulatory bureacracies will have jurisdiction over different aspects of zone operations.

Beijing has said that the FTZ will test yuan convertability and interest rate liberalisation, changes long-awaited by economic reformers, who consider them fulcrums for redirecting the Chinese economy away from its focus on wasteful fixed asset investment by state-owned firms.

But economists have expressed scepticism that regulations can limit deep reforms to lending and currency markets to companies within the zone without impacting the wider national economy.

“You just open the door to massive arbitrage opportunities,” said Mark Williams, chief China economist at Capital Economics in London.

Corporate treasurers and other industry insiders have also expressed concerns that the reform project could be distorted or derailed by intensifying competition between different financial regulators and local governments over who is in charge.

Foreign multinationals have said that friction between the People’s Bank of China and the State Administration of Foreign Exchange over currency liberalisation pilot programmes has discouraged them from committing too much capital to the projects.

A free trade zone in Qianhai near Shenzhen last year was launched to similar fanfare but so far the financial reforms have not lived up to expectations, and a land auction failed to attract much international investor interest.

In addition, other cities are proposing to create their own FTZs. Guangdong is studying integrating its existing economic zones, including Qianhai, into a unified zone that will similarly test new financial and industrial policies. The cities of Tianjin and Xiamen have also proposed similar zones to the state council, domestic media have reported. (Reuters)