New Free Trade Zones to Set Up in China

02_ChinaChina will set up three new free-trade zones in Guangdong, Fujian and Tianjin, based on experience drawn from experiments in Shanghai’s free trade zone, to test greater opening-up and tap the economy’s huge potential to hedge against mounting downward pressure in 2015. The Chinese government has been authorized to ease investment rules in three new free trade zones (FTZs) after top legislature gave the go ahead during a bi-monthly meeting on 28 December, 2014.
Shanghai’s free trade zone, or FTZ, which opened in September 2013, was heralded as a laboratory for ambitious free market reforms that would lift everything from financial and currency restrictions to administrative controls on foreign investment.

But investors have been mostly disappointed by progress in the zone and say it provides almost no advantages for foreign or domestic companies operating there. There are virtually no business or investment activities permitted in the Shanghai zone that are not also allowed in the rest of China and the reforms that have been announced so far have been tiny and incremental.

The Shanghai zone has also faced opposition from local officials, as well as some ministries in charge of financial and economic oversight and has also already been affected by an alleged corruption scandal that saw the removal of one of its most senior officials.

In a statement announcing the three new zones, the State Council, China’s cabinet, also promised more experimentation would be conducted within the existing Shanghai FTZ to encourage foreign investment and the development of advanced manufacturing and the service sectors. The new zones will be based on the Shanghai model but will also include “local characteristics” the statement said.

According to the resolution, the Guangdong FTZ, with a total area of 116.2 square km, will include zones in the cities of Guangzhou, Shenzhen and Zhuhai.

The Tianjin FTZ, with a total area of 119.9 square km, will consist of three sections around the Tianjin Port, Tianjin Airport and the Binhai New Area industrial park.

The Fujian FTZ, with a total area of 118.04 square km, will include industrial areas in the provincial capital of Fuzhou, the city of Xiamen, and Pingtan, a new industrial park targeting Taiwan investment.

An area of 91.94 square km will also be added to the Shanghai FTZ.

President Xi says that Shanghai pilot zone reforms can bear fruit elsewhere

The business model behind the pioneering China (Shanghai) Pilot Free Trade Zone should now be copied at other suitable sites across the country where conditions are right, according to President Xi Jinping.

Addressing a meeting of top decision-makers, the president said the experience gained in the Shanghai FTZ “are like seeds cultivated in a test field, and now we will plant them across a greater range of sites, in a hope that they will bear more fruit”.

Xi acknowledged the progress made in the Shanghai FTZ, praising the efforts in transforming government functions, facilitating investment and trade, and improving the business environment.

Growth in Chinese trade has been lacklustre for the last year and has slumped in recent months, causing concern among policy makers who are also confronted with a sharp slowdown in domestic real estate and serious overcapacity throughout the industrial sector.

China is on track to post its slowest annual growth rate in 25 years this year and Beijing sees boosting trade and exports as the simplest and most effective way of stopping growth from falling further.

Officials have recently discussed the possibility of setting up more FTZs in countries in Southeast and Central Asia along what Beijing has dubbed the “21st Century Silk Road Economic Belt and Maritime Silk Road” trade routes between China and Europe.

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