New FTZs a sig­nal to Shang­hai

China Daily (Canada) - - SHANGHAI - By LI YANG in Shang­hai liyang@chi­nadaily.com.cn

China’s State Coun­cil has de­cided to set up three new free trade zones in Guang­dong, Tian­jin and Fu­jian to ex­plore new re­forms to­gether with the first FTZ cre­ated last year in Shang­hai.

Shang­hai FTZ’s main achieve­ments are mak­ing business reg­is­tra­tion eas­ier and pro­mot­ing “neg­a­tive list” mod­els to re­strict gov­ern­ment power, which is dis­ap­point­ing given its mis­sion as an ex­plorer of key re­forms for the na­tion in cru­cial ar­eas, such as fi­nance, trade and gov­er­nance.

The three new FTZs ex­posed the cen­tral gov­ern­ment’s dis­sat­is­fac­tion with Shang­hai FTZ’s per­for­mance, and the cen­tral gov­ern­ment’s con­fi­dence with the FTZ model, a de facto ex­per­i­ment to con­trol the pos­si­ble risks of pi­lot­ing new prac­tices.

Un­like the Shen­zhen spe­cial eco­nomic zone set up by China’s for­mer leader Deng Xiaop­ing in the early 1980s, which was to test whether to abol­ish the planned econ­omy, the FTZs to­day test how to build a mar­ket econ­omy bet­ter fit­ting China’s do­mes­tic sit­u­a­tion and in­ter­na­tional sta­tus.

Shen­zhen re­ceived div­i­dends from Pareto im­prove­ment, which ben­e­fited almost all par­ties in­volved. What the Shen­zhen of­fi­cials needed to over­come was the dog­ma­tism de­vel­oped be­fore the end of the “cul­tural revo­lu­tion” (1966-76).

Yet, it takes more to run FTZ, as the past year of Shang­hai FTZ in­di­cates. The FTZ ad­min­is­tra­tors must have the abil­ity to co­or­di­nate depart­ment in­ter­ests, one of the main ob­sta­cles for deep­en­ing re­forms.

Ac­cord­ing to Premier Li Ke­qiang, set­ting up the FTZ is to bal­ance the re­la­tions be­tween gov­ern­ment and the mar­ket, open­ing up and de­vel­op­ment as well as ex­plor­ing new re­forms in im­por­tant ar­eas.

Six months ago, the cen­tral au­thor­ity turned down the ap­pli­ca­tions from dozens of ci­ties to set up new FTZs, say­ing FTZs will not en­joy tai­lor­made pref­er­en­tial poli­cies, to cool down lo­cal gov­ern­ments’ pas­sion and make them aware of the dif­fi­culty of run­ning an FTZ.

The cen­tral gov­ern­ment’s dis­sua­sion paid off. Last month, only Shan­dong, Zhe­jiang, Jiangsu, Guangxi and the three fi­nal win­ners in­sisted in ap­ply­ing for set­ting up FTZs, whose am­bi­tions may par­tially stem from Shang­hai FTZ’s lack­lus­ter record and their unique po­si­tions in China’s econ­omy and for­eign trade.

Shan­dong is the most popular des­ti­na­tion for in­vest­ment from South Korea in China.

Jiangsu and Zhe­jiang are the two largest man­u­fac­tur­ing cen­ters in China hav­ing global con­nec­tions.

Guangxi is the front line in China’s co­op­er­a­tion with South­east Asia.

Guang­dong’s ad­van­tage is its close con­nec­tion with Hong Kong and Ma­cao.

Fu­jian is a neigh­bor with Tai­wan.

Tian­jin’s fi­nan­cial sec­tor is stronger than Shan­dong’s, and can serve as a strong foothold in China’s trade with North­east Asia.

Shang­hai FTZ will con­tinue its ex­plo­ration in gen­eral re­forms in fi­nan­cial, trade and gov­er­nance sec­tors. The three new FTZs will im­ple­ment Shang­hai FTZ’s new fruits in their trade with re­spec­tive trade part­ners, and also ex­plore pos­si­ble re­forms in the afore­men­tioned key ar­eas as a com­peti­tor with Shang­hai.

Guang­dong, Jiangsu, Shan­dong, Zhe­jiang and Fu­jian’s com­bined econ­omy ac­counts for about 40 per­cent of China now, which is made up of more than 30 provin­cial re­gions.

Ac­cord­ing to the ap­pli­cants’ plan, the three new FTZs are much larger than Shang­hai FTZ, which is 28.78 square kilo­me­ters. Tian­jin FTZ is 260 sq km, Fu­jian FTZ can be as big as 550 sq km, and Guang­dong FTZ cov­ers an area of 940 sq km.

Apart from the ex­plo­sion of size, some changes are pre­dictable. It will be eas­ier to invest and trade in the FTZs. More for­eign cap­i­tal will en­ter China through th­ese FTZs, and vice versa.

Shang­hai FTZ will con­tinue its ex­plo­ration in gen­eral re­forms in fi­nan­cial, trade and gov­er­nance sec­tors. The three new FTZs will im­ple­ment Shang­hai FTZ’s new fruits in their trade with re­spec­tive trade part­ners, and also ex­plore pos­si­ble re­forms in the afore­men­tioned key ar­eas as a com­peti­tor with Shang­hai.

CHINA DAILY FAN JUN /

Yang­shan port in the Shang­hai Free Trade Zone in Septem­ber, at the first an­niver­sary of the FTZ.

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