China’s State Council has formally approved the establishment of a pilot free trade zone in Shanghai, according to a statement issued by the Ministry of Commerce on 22 August 2013.
Covering 28.78 square kilometers, the Shanghai free trade zone will include the existing bonded zones: Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
The pilot zone is a crucial move in adapting to global economic and trade development and imposing a more proactive opening-up strategy, according to the statement. The main task is to explore a new path and model for China’s opening up, speed up transformation of government functions and promote economic restructuring. The zone will help foster China’s global competitiveness and serve as a new platform for the nation’s cooperation with other countries, and contribute to efforts in building “an upgraded version of China’s economy”, said the statement.
The planned reforms include greater liberalization of the service industry, furthering opening-up and innovation in the financial industry, investment management mode innovation, transformation of the mode of trade development, as well as establishing a supervision system adaptable to the pilot zone, the ministry said without offering details.
It said the State Council has asked the Standing Committee of the National People’s Congress to review and decide on adjusting related laws on administrative approvals and other items in the Shanghai zone.
The measure was expected to ease the administrative approval procedures for foreign investment. It’s also a first step in setting up a new financial architecture as the country pursues a round of economic reform.
According to the earlier meeting, the free trade zone will explore an innovative “blacklist” management system, which only regulate the forbidden areas and all the rest will be open for investors, in a bid to improve the efficiency of foreign investment.
Shanghai is seeking to further build itself into an international financial and trading center. Shanghai Mayor Yang Xiong told lawmakers in July that the planned free trade zone would not rely solely on preferential policies but rather on institutional changes.
Approval of the pilot free trade zone came as China’s economy, the world’s second largest, slows in part because of weaker exports. Analysts said previously the establishment of free trade zone in Shanghai raised opposition and disputes from the financial industry regulators, but now the formal approval shows that the Chinese government has determined to open a new round of economic reform.