A bird's eye view of the Shanghai Yangshan Deep-Water Port within the newly launched Shanghai Free Trade Zone, Sept 10, 2013. [Photo / Xinhua]

SHANGHAI/HONG KONG -- Casting your eye over the media hype around the Shanghai Free Trade Zone (FTZ), officially launched on Sunday, it is fair to say that most of the ruckus is coming from Hong Kong.

Over past months, the scheme has been the hot topic in the city. The media there have had plenty to say about the 29-square-kilometer FTZ, which encompasses four existing bonded zones in Shanghai's eastern suburb.

One popular activity has been second-guessing the fine details of FTZ policy, while another trending pastime is drawing comparisons between Shanghai, the mainland financial hub, and Hong Kong, the historical business gateway to the mainland.

A few naysayers have gone as far as to sound the death knell for Hong Kong, albeit a little prematurely, warning that a Shanghai with an FTZ poses a serious threat to the island financial paradise.

It is somewhat trite perhaps to remind people that these same voices were singing the same song of Hong Kong's imminent demise more than a decade ago when China entered the World Trade Organization (WTO).

However, most analysts who talked to Xinhua, both on the mainland and in Hong Kong disagree. It is true that Shanghai and Hong Kong probably cannot avoid competing with each other in the offshore financial services marketplace, especially over yuan business, but such competition will mean a bigger business cake for all, not smaller crumbs.

The roles and functions of the two cities are very different in the country's overall financial layout. The Shanghai FTZ is essential from China's financial reform and trade perspectives. It is consistent with the long-term goal of strengthening the services sector.

Hong Kong's business community would be well advised to prepare to seize the business opportunities the Shanghai FTZ will bring.

Chen Bingcai, researcher at Beijing-based Chinese Academy of Governance, believes Shanghai and Hong Kong have different strategic orientations and may compete with each other for offshore business.

Shanghai will mainly serve domestic enterprises while Hong Kong is the well-established launch pad for international capital to enter the mainland. The aim of the Shanghai FTZ is not to compete with Hong Kong, but to reach international standards in terms of convenience of investment and trade, free currency exchange, efficient supervision and a sound legal environment, Chen told Xinhua.

Nationally, the FTZ is seen as a testing ground for new policies and reform. It will take the lead in driving growth in the Yangtze River Delta and even the entire nation, he added.

He Wen, a researcher with the Shanghai Institute of East Asia Studies, said the FTZ is a must for the mainland based on its developmental trajectory. Shanghai and Hong Kong complement each other. Shanghai is playing catch-up, lagging far behind Hong Kong in terms of development. The "One Country, Two Systems" principle is Hong Kong's biggest advantage.

You Anshan, head of research in Hong Kong and Macao affairs at the Shanghai Academy of Social Sciences, compared Shanghai to a newborn baby who has a lot to learn from Hong Kong, saying that under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), Hong Kong will embrace opportunities for common development in the FTZ.

Shen Minggao, Citibank's chief economist for China, said at a recent forum that the FTZ is a significant aspect of China's reforms, and sustainable development of the mainland economy is the biggest bonus for Hong Kong.

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