Free port proliferation brings status of HK into question
The first session of the 13th National Committee of the Chinese People’s Political Consultative Conference concluded in Beijing last Friday. During the session, 21 CPPCC members from the Hong Kong Special Administrative Region — led by businessman Peter Lam Kin-ngok — jointly submitted a proposal on establishing a free trade port, or FTP, in Shantou, Guangdong province.
Those Hong Kong CPPCC members found Shantou — one of the four original special economic zones established in the early days of the reform and opening-up drive almost 40 years ago — needed a kick-start to rejuvenate itself; FTP status should do just that. Their motive is definitely commendable but there is no telling how it will fit into the central authorities’ plan for Guangdong in coming years. Noting General Secretary Xi Jinping’s suggestion in his report at the 19th National Congress of the Communist Party of China that local governments should “explore the possibility of establishing free trade ports”, they proposed setting up an FTP in Shantou to boost the city’s role in the deepening reform and opening-up campaign of the Chinese mainland. Whether central authorities will accept their proposal is not the focus of this article. What I will discuss here is that local governments on the mainland are likely to establish FTPs in existing pilot free trade zones; Hong Kong should take note.
The 18th National Congress of the CPC, held in Beijing in November 2012, marked the beginning of the new era of socialism with Chinese characteristics. Central authorities decided back then that one of the entry points of deepening reform and opening-up would be a Free Trade Zone in Shanghai.
The China (Shanghai) Pilot Free Trade Zone, or PFTZ, was officially established in September 2013, in an area formerly known as the Shanghai Comprehensive Bonded Zone (CBZ), including Shanghai Waigaoqiao Bonded Zone and Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port and Shanghai Pudong Airport CBZ. It is common knowledge that various bonded zones function mainly as “big warehouses”, just as Hong Kong did in the early days of British rule in the 19th century, when London decided to establish a “free port” there. The Shanghai PFTZ is the first of its kind on the mainland. It is basically a bonded port-turned FTZ where Shanghai explores new ways to expand the opening-up of the real economy and financial industry.
Establishment of PFTZs on the mainland is aimed at further liberalizing foreign trade and investment, especially further opening-up to the outside world, and at strengthening and expanding the real economy and financial industry. The Shanghai PFTZ initially covered less than 29 square kilometers in three separate sites and could not serve the purpose of a FTZ.
That is why the central government announced in December 2014 that the Shanghai PFTZ would be expanded to include the Lujiazui financial district, Jinqiao development area and Zhangjiang high-tech district; while adding three more PFTZs in Guangdong, Tianjin and Fujian, each occupying about 120 square kilometers of land, to accommodate development of the local real economy and financial services. That move also launched the second PFTZ development phase on the mainland. In this phase only the bonded zones within the PFTZs are “free ports” while the whole PFTZs are not, meaning they are not as open as Hong Kong is.
In accordance with the instruction in Xi’s report at the 19th National Congress of the CPC to “explore ways of developing FTPs”, Premier Li Keqiang said in his Government Work Report at the first session of the 13th National People’s Congress that the country would strive to achieve a new pattern of comprehensive opening-up, further extend the scope and depth of opening-up, further improve the structure, system and mechanism of opening-up and advance quality development by aiming high, including fully duplicating the Shanghai PFTZ and exploring ways to develop FTPs, so as to take reform and opening-up to new heights.
Hong Kong can help FTP development on the mainland with its own experience and system know-how. SAR government officials as well as business people and professionals can take part in or assist FTP development on the mainland. This can be seen as Hong Kong making new contributions to the country in the new era of socialism with Chinese characteristics. On the other hand, the SAR government and Hong Kong society must elevate their awareness of “sailing against the current”.
Next, the PFTZs will likely become pilot free trade ports (PFTPs) when FTZ development enters the third phase. By then there may emerge some economic zones comparable to Hong Kong in terms of openness.
Just imagine, when there is one or maybe several FTPs covering 120 square kilometers each on the mainland, with almost no tariffs on foreign imports of commodities and highly open to financial and other services, wouldn’t that mean the mainland economy has one, or more than one, “Hong Kong Island”?
Hong Kong’s economic development began on the island, which has long been the heart of Hong Kong’s economy. Once the mainland has a number of Hong Kong Island “equivalents” its economic development will be greatly boosted for sure.
Today a few major cities on the mainland have surpassed Hong Kong in terms of economic aggregate. Hong Kong is also behind in developing innovation and technology industries. When those mainland cities catch up with Hong Kong in economic openness, Hong Kong’s status in the country, Asia and the world will be in question.
The only way for Hong Kong to elevate its status is by integrating its own development into the overall development strategy of the country and assuming the lead role in the Guangdong-Hong Kong-Macao Greater Bay Area development.