New FTZs set to take off after State Council issues guidelines

Establishment to stimulate domestic economy

The Chinese government announced on Friday that the country plans to launch seven new free trade zones (FTZs) to inject vitality into domestic economy and stimulate reforms.

The seven FTZs will be located in the provinces of Northeast China’s Liaoning, East China’s Zhejiang, Central China’s Henan and Hubei, Southwest China’s Sichuan and Northwest China’s Shaanxi as well as Southwest China’s Chongqing Municipality.

According to a general guideline on the seven new FTZs published by the State Council on Friday, setting up the FTZs is a “strategic measure” launched at a time of deepening reforms and expanding opening-up.

“It will speed up the transformation of government functions, stimulate the convenience of trade and investment as well as deepen financial innovation,” the guideline noted.

Specific guidelines show that the FTZ in each province will cover several areas. For example, the FTZ in Hubei will be spread across three cities: Wuhan, Xiangyang as well as Yichang.

China Business News reported on Friday that Henan and Hubei provinces will hold press conferences on FTZs on Saturday.

Xu Hongcai, deputy chief economist at the China Center for International Economic Exchange, told the Global Times on Friday that new FTZ locations are “typical areas which mostly have an export-oriented economy and have a good basis for opening-up.”

Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, also noted that the new FTZ locations are mostly centered around the Yangtze River Delta, the Pearl River Delta as well as the Bohai Economic Rim, all of which are economically advanced regions.

Many provinces have made good preparations for the establishment of these new FTZs. “In Hubei for example, the local government has been promoting and expanding economic zones like Wuhan’s East Lake HighTech Zone in the recent few years. Those efforts are made in order to make the best use of the FTZ opportunity and to maximize its benefits,” Dong told the Global Times.

According to Xu, the FTZs will greatly benefit the provinces, especially those with slow economic growth like Liaoning.

“Liaoning is not backward in its industries; instead, it’s backward in its marketization level and administrative system,” he noted. “I believe the FTZ will prompt the local governments to speed up reforms.”

The new FTZs are the third batch of FTZs to be set up in China. In September 2013, China’s first FTZ was set up in Shanghai.

In December 2014, the Chinese government expanded the FTZ footprint to North China’s Tianjin, and South China’s Guangdong and East China’s Fujian provinces.

Xu said that the new FTZs can replicate the regulations of the existing FTZs, but they also need to be modified to suit local conditions.

“For example, in Zhengzhou of Henan, where logistics is very developed, commodity trade can be a focus of the FTZ,” he noted.

On Friday, the Chinese government also released a guideline to deepen the opening-up of the Shanghai FTZ.

The guideline calls for adopting a more transparent market access management model, deepening the reforms on company registration system as well as perfecting the system of intellectual property protection.

Xu said that the existing FTZs also need to improve in many ways. For example, the negative list of market access restrictions needs to be shortened, and the services sector needs to open up to a greater level to overseas investors.