LI YANG As­sess­ing FTZ after first year

China Daily (Canada) - - SHANGHAI -

Chi­nese lead­ers con­firmed the Shang­hai Free Trade Zone’s (FTZ) pur­suit of re­forms in business reg­is­tra­tion, trade and gov­ern­ment on the first an­niver­sary of the ex­per­i­men­tal field’s es­tab­lish­ment.

The cen­tral gov­ern­ment’s pos­i­tive as­sess­ment of the Shang­hai FTZ kin­dled many lo­cal gov­ern­ments’ pas­sion to ap­ply for new FTZs. The cen­tral gov­ern­ment should be pru­dent in de­cid­ing whether to cre­ate new FTZs.

The FTZ craze ap­peared for the first time after the Shang­hai FTZ was cre­ated. Dozens of ci­ties ap­plied to set up FTZs, boast­ing of their unique ad­van­tages.

It is the sec­ond time that some lo­cal gov­ern­ments, es­pe­cially from the coastal re­gions, have shown strong in­ter­est in es­tab­lish­ing new FTZs.

Chi­nese lead­ers have pro­posed build­ing a Silk Road Eco­nomic Belt on the Eurasian con­ti­nent and a 21st Cen­tury Mar­itime Silk Road to boost re­gional in­te­gra­tion and trade with the coun­tries and re­gions in the Pa­cific Ocean and In­dian Ocean.

The two pro­pos­als have been up­graded to na­tional strate­gies and cre­ate a larger con­text for the sec­ond wave of FTZ de­sires among lo­cal gov­ern­ments.

Tian­jin, Guang­dong, Guangxi, Shan­dong, Fu­jian are the five like­li­est can­di­dates. Tian­jin and Shan­dong’s ap­pli­ca­tions tar­get China’s trade with South Korea. Trade with Hong Kong and Ma­cao is cen­tral to Guang­dong’s ap­pli­ca­tion. Trade with Tai­wan is Fu­jian’s main card, and South­east Asia is key in Guangxi’s ap­pli­ca­tion.

Th­ese ap­pli­cants only see FTZs’ mis­sions in pro­mot­ing trade, and down­play their roles in pur­su­ing re­forms in fi­nance and gov­ern­ment, which are ac­tu­ally the main headache-mak­ers for a Shang­hai FTZ ad­min­is­tra­tion that has seen some of its main lead­ers reshuf­fled some­times twice a year.

Ac­cord­ing to Shang­hai FTZ todo list, what it has done lags far be­hind its three-year sched­ule. The cen­tral au­thor­ity re­quired Shang­hai to pro­vide ma­ture mod­els of fi­nan­cial and gov­ern­ment re­forms to trans­plant across the coun­try.

The Shang­hai FTZ’s main achieve­ments are that it makes business reg­is­tra­tion eas­ier, and its ad­min­is­tra­tion im­ple­ments a long “neg­a­tive list” in gov­er­nance to cut red tape and mark lim­its of gov­ern­ment power. The mar­ket play­ers can do what­ever they want on the list, with which the gov­ern­ment has no power and rights to in­ter­vene.

The Shang­hai FTZ business reg­is­tra­tion sys­tem stresses an easy reg­is­tra­tion and strict su­per­vi­sion, a ma­jor change from the pre­vi­ous one, which was dif­fi­cult and lacked su­per­vi­sion. The new sys­tem greatly stim­u­lates Chi­nese peo­ple’s pas­sion in cre­at­ing and run­ning their own busi­nesses.

In the first eight months of this year, the num­ber of newly regis­tered busi­nesses in­creased by 15.75 per­cent year over year. Mean­while, the regis­tered business cap­i­tal, a must in start­ing business in China, rose by 66.7 per­cent year over year.

The “neg­a­tive list” gov­er­nance model gives more free­dom and space to the en­ter­prises, which ben­e­fits en­ter­prises from home and abroad; fa­cil­i­tates trade; and trans­forms the gov­ern­ment into pub­lic ser­vice providers and mar­ket or­der main­tain­ers.

In the first eight months, Shang­hai FTZ’s im­port and ex­port business in­creased by 11 per­cent year over year, and the lo­gis­tics cost de­creased by 10 per­cent. the amount of newly regis­tered busi­nesses in­creased in first eight months of 2014 the amount of regis­tered business cap­i­tal in­creased year over year

But the dif­fi­cult re­forms, such as ren­minbi ex­change rate, an in­ter­est rate-form­ing mech­a­nism, and in­ter­est rates, re­quire joint ef­forts of dif­fer­ent min­istries.

What Shang­hai has done is within its own power and does not af­fect the other min­istries. Shang­hai au­thor­ity has re­peat­edly ap­peal for the cen­tral gov­ern­ment’s co­or­di­na­tion of dif­fer­ent min­istries to help the FTZ fight against the re­sis­tance from the vested in­ter­est.

Oth­er­wise, it is almost im­pos­si­ble for Shang­hai to win the up­hill bat­tle alone.

Many ap­pli­cants be­lieve the cen­tral gov­ern­ment can mete out fa­vor­able poli­cies and in­crease in­put for fu­ture FTZs, de­spite the cen­tral au­thor­ity’s de­nial of do­ing so a year ago.

China ur­gently needs to make break­throughs in the key re­forms in the Shang­hai FTZ rather than cre­at­ing more FTZs.

Deng Xiaop­ing cre­ated the sev­eral spe­cial eco­nomic zones and many open-up ci­ties along China’s coast in the 1980s to push mar­ket re­form.

Only Shen­zhen ful­filled its task as spe­cial eco­nomic zone for a longer time, and almost all the other zones and ci­ties lost their lus­ter sev­eral years later after ex­haust­ing the fa­vor­able pol­icy bonuses.

After China com­pletes its re­forms, the coun­try may have more FTZs. The ap­pear­ance of more FTZs should be a nat­u­ral re­sult of the eco­nomic and trade de­vel­op­ment of the coun­try, in­stead of a re­flec­tion of the gov­ern­ment’s will. Con­tact the writer at liyang@ chi­nadaily.com.cn

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