The Shanghai FTZ is now seen by the Hong Kong business community as complimentary rather than competitive in servicing the diverse needs of the mainland as the new round of economic reforms begins to gather pace in coming months and years. Hong Kong can work with the Shanghai FTZ to achieve specific objectives without having to become part of it. It can also do so with the proposed Guangdong version of the Shanghai FTZ.

As it is, free trade in Hong Kong is already well established, it services not only the mainland but also the entire region and beyond. It is also a well-established renminbi offshore center. The total renminbi deposits in Hong Kong amount to about 900 billion yuan ($147 billion) and are growing fast.

More importantly, banks in Hong Kong are constantly exploring ways to utilize that large pool of renminbi funds to finance corporate expansion and infrastructure projects on the mainland. The Hong Kong offshore renminbi market has become an increasingly important source of longer-term funding to many mainland enterprises because of its market-oriented and reliable pricing mechanism.

For that reason, the immediate challenge to Hong Kong's position as the premier offshore renminbi market is coming from the other established financial centers, including London and Singapore, rather than Shanghai or Shenzhen. It is understandable why Guangdong wants to tap Hong Kong's advantages. But if the FTZ conceived by the Guangdong authorities is based on the market-oriented model of the Shanghai version, it should be designed to stand on its own rather than trying to incorporate Hong Kong into its fold.

The author is a senior editor with China Daily. Email: jamesleung@chinadaily.com.cn