A much-hyped land auction in a developing free-trade zone in southern China failed to attract any of Hong Kong's powerful property developers, signaling growing investor caution towards the ambitious $45 billion project. More than 50 journalists vastly outnumbered the two mainland bidders present, with developer China Resources Land Ltd beating Shimao Property Holdings Ltd with a bid of 10.9 billion yuan ($1.8 billion) for the commercial site in the southern boom town of Shenzhen where the zone is located. The auction was restricted to Hong Kong-listed companies with a market value of at least HK$40 billion ($5.16 billion), according to the land sale document. "There were Hong Kong developers who were very interested and have been in contact with us, but they dropped out in the end and we don't quite understand the situation," said Lin Hong, vice president of the Authority of Qianhai Shenzhen Hong Kong Modern Service Industrial Corporation Zone of Shenzhen. More than a year after Beijing unveiled details of the Qianhai project to build a "mini-Hong Kong" and experiment with currency convertibility, scant details on benefits and services have left some potential investors scratching their heads. "It's a strange time because most of the people in the Hong Kong industry don't buy the idea of having some of their businesses located there," said Wanxin Li, a public policy professor at City University of Hong Kong. Focused on finance, logistics and IT services, the Qianhai Bay economic zone hopes to draw on Hong Kong's expertise as a hub for the renminbi, or offshore yuan, as it seeks to provide the same services in renminbi, bond and equity offerings, insurance products and trade settlement. Backed by senior party leaders including President Xi Jinping, the Qianhai zone, a barren stretch of reclaimed land near the Hong Kong border, is offering preferential tax rates and other incentives to lure companies to set up shop. Indeed, the proposed $45 billion zone has attracted 1,144 companies with registered capital reaching 140 billion yuan ($23 billion) as of July 19. Among them, financial institutions accounted for 73 percent and include HSBC Holdings Plc , UBS AG and Sumitomo Mitsui Banking Corp . Entry Barriers Qianhai's problem though is that it is no longer the only horse in the race. Since it revealed its desire to become a free-trade pilot zone, other cities across China, including Shanghai, have announced their own plans to establish similar economic zones, throwing a cloud on what edge Qianhai would offer to prospective clients. Hong Kong's premier status as an offshore yuan hub has also raised questions on what Qianhai's value proposition would be in the long term. Bankers in Hong Kong said that while they were glad to see China quickening the pace of opening up the strictly-controlled capital account, vague policies and a lack of details on implementation pose significant barriers for them. "We are a bit confused since there are so many free-trade zone proposals coming out following Qianhai, while even details of favorable policies in Qianhai are not very clear yet," said a senior banker in Hong Kong, who asked to be identified as he was not authorised to speak to the media. The banker, who went to Qianhai with Hong Kong's Treasury Markets Association this year, expressed concern over issues such as tax structures, which he said Qianhai officials had promised would be simple, but are turning out to be complex. In addition to Shanghai, other areas that have proposed setting up free-trade zones include Xiamen, Tianjin, Guangzhou, Nansha and Zhuhai, according to local media reports. Frankie Au, Standard Chartered's head of RMB products in Asia, said, however, Qianhai had a geographic advantage in being located in Shenzhen as well as in the centre of the Pearl River Delta region and just next to Hong Kong. Property Bubble Property investors seem to be betting that Qianhai will rise above the rest because of its location. Qianhai's home prices rose 15 to 20 percent in the first half of this year, outperforming a 9 percent increase in Shenzhen's average home prices, according to Centaline property agency. The site at the auction on Friday is designated for the development of office, retail and serviced apartments, although some have cautioned that the market is already too hot. "The property market in Qianhai is overheated. Some of the projects were sold out immediately after the debut, while some rose 30 percent, 50 percent or even double in the past year. The 'Qianhai Concept' has obviously been overdrawn," said Wang Yong Sheng, sales director at C'est La Vie, a large residential project near Qianhai. Last month, two commercial sites in the same district were sold to mainland developer Excellence Group for a total of 12.4 billion yuan. One of the plots was sold for 7.18 billion yuan, a record high for land prices in Shenzhen. (Reuters)