The launch of free trade zones (FTZs) in Tianjin Municipality, Guangdong and Fujian provinces on April 21 reveals China’s overall pattern for FTZ establishment. The first FTZ was established in Shanghai in September 2013.

These four FTZs cover the country’s three major economic regions, namely the Yangtze River economic belt, the Pearl River Delta economic zone and the Beijing-Tianjin-Hebei region.

In the short term, the four FTZs will endeavor to explore the institutional innovation for promoting reform and opening-up.

Each FTZ has its own development priorities. The Shanghai FTZ is oriented to financial development, which is based on the Yangtze River economic zone. With the aim of supporting the integration of the Beijing-Tianjin-Hebei region, the Tianjin FTZ will focus more on the development of manufacturing and opening-up, benefiting greater North China.

On the basis of the Pearl River Delta economic zone, the Guangdong FTZ will promote the development and openness of the service industry and deepen cooperation between Guangdong Province and the Hong Kong and Macao special administrative regions. The Fujian FTZ will give full play to its geographical proximity to Taiwan and strive to make trade breakthroughs by supporting the “One Belt, One Road” initiative, or the Silk Road Economic Belt and 21st Century Maritime Silk Road.

As the leader of the Chinese economy, Shanghai has played a significant role in stimulating economic growth. After taking the city’s advantages into full consideration, the central government selected the city as the base for a pilot FTZ. After more than one year of operation, the Shanghai FTZ has made achievements in investment and trade facilitation.

However, there are some controversies on the “negative list” mode. After-event supervision should be strengthened in future so that the experience of the Shanghai FTZ can be directly promoted to the other new FTZs.

As a municipality neighboring Beijing, Tianjin occupies an important position. The Tianjin FTZ aims to advance the economic development of North China, including Northeast China.

In recent decades, Guangdong Province has gained valuable institutional innovation experience. As a special economic zone, Shenzhen has always been regarded as a pioneer city of reform and opening-up. By giving full play to its traditional advantages, Guangdong Province should engage more deeply in institutional innovation.

The main reasons for establishing the FTZ in Fujian Province are its historical and geographical advantages. Quanzhou in southeastern Fujian Province was the starting point of the ancient Maritime Silk Road. Nowadays, the province is regarded as the core area of the “One Belt, One Road” construction. In addition, Fujian Province and Chinese Taiwan are situated at either side of the Taiwan Strait, which requires the Fujian FTZ to strengthen communication between both places.

In terms of the FTZ policy design, changes to the outside environment, especially the transition of international rules and fierce competition, must be actively dealt with and implementation of reforms through opening-up must be deepened. It is therefore a priority for FTZs to continuously enhance their innovation capability and accumulate experience of reform and opening-up through institutional innovation.

The Shanghai FTZ has accumulated substantial experience, but still needs to make breakthroughs in institutional innovation. For the financial reform, different parties should better coordinate with each other to enhance the city’s service capability. The most pressing task is determining how to strengthen after-event supervision, rather than only depending on pre-event approval.

The Tianjin FTZ also faces many challenges. On the one hand, innovation is not a traditional advantage of the city. On the other hand, it lacks the ability to influence the central government’s decision despite its close proximity to the capital. Due to relatively strong administrative intervention, Tianjin has always been confronted with shortages in economic development as well as reform and opening-up. The Tianjin FTZ should prioritize opening to the outside amid the Beijing-Tianjin-Hebei integration.

The Guangdong FTZ may be able to realize expected targets. There are some traditional advantages in Guangdong Province, including minimal administrative intervention and abundant innovative market players. The Guangdong FTZ should further strengthen opening-up and encourage more enterprises to expand their reach.

It is an arduous task for Fujian Province to establish its FTZ. It requires taking more innovative efforts and giving full play to its geographical location opposite Taiwan. In fact, compared with other provinces and municipalities, few businesspeople from Taiwan have invested in Fujian Province. It is therefore necessary for the province to further enhance infrastructure, investment environment and government services.

In general, it is crucial for the four FTZs to improve their innovation capability, including institutional innovation and after-event supervision. Their establishment represents a significant strategic move to promote reforms through opening-up.

Zhong Chunping is a research fellow from the National Academy of Economic Strategy at the Chinese Academy of Social Sciences.


The Chinese link: http://opinion.china.com.cn/opinion_12_125712.html

Translated by Chen Meina

Revised by Tom Fearon