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FTZ expansion signals global ambitions

China Daily Updated: 2019-03-15

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The China (Shanghai) Pilot Free Trade Zone has become a test bed for new economic policies. [Photo/Xinhua]

"Such a breakthrough in offshore trade helps us to further explore practices to increase the growth of our international business," Hang said.

Statistics from the Information Office of the Shanghai Municipal Government show that in the five years since the FTZ was established, the total import and export volume has reached 6 trillion yuan ($900 billion), with realized foreign investment of more than $22 billion and 57,000 registered businesses.

More important, the zone has become a test bed for new economic policies. A total of 127 systematic innovations that were first implemented in the Shanghai FTZ have been promoted nationwide in the past five years. One such innovation, the negative list system-which defines sectors in which foreign entities are not allowed to invest-was initially introduced by the zone to manage foreign capital. Last year, it was expanded nationwide.

In addition, the zone's deepened reforms, aimed at facilitating efficient customs clearance, reduced entry and exit times in bonded areas by 78.5 percent and 31.7 percent respectively, compared with the national average. The move has been hailed as a benchmark for the rest of the country to emulate.

Meanwhile, a report by the World Bank in October showed that China's business environment rose to a global ranking of 46 last year, up from 78 in 2017.

Tariff policy

National lawmakers and political advisers have also suggested a zero-tariff policy to better promote free trade.

Xu Juehui, an NPC deputy and deputy Party head and managing director of Shanghai Port International Cruise Terminal Development, said tariffs at many FTZs across the globe are zero or almost zero. However, the current tariff policy at the Shanghai FTZ means it echoes the duties imposed on specific goods overseas, so there are no advantages to attract trade and logistics resources from other countries.

"Based on the principle of trade reciprocity, I suggest promoting a zero-tariff policy in the new area of the Shanghai FTZ," Xu said.

Jiang Ying, a CPPCC member and deputy CEO of Deloitte China, suggested that optimization of the tax system in the Shanghai FTZ should begin with fields related to the headquarters economy, the trade in goods and services, and finance and capital markets, which would demonstrate the zone's forward-looking approach.

Denis Simon, executive vice-chancellor of Duke Kunshan University in Jiangsu province, said Shanghai has been seeking to strengthen its role as an innovation hub, and the expansion of the city's FTZ would be an opportune time for this to happen.

"By freeing up the local economy from pre-existing constraints on capital flows and having an improved climate for the development and protection of intellectual property rights, the FTZ can serve as an important catalyst for driving indigenous innovation," he said.

Moreover, if the zone can attract ample high-end talent, it may serve as a magnet to attract foreign research and development centers to the area, according to Simon.

He added that the presence of local and multinational companies engaged in R&D and knowledge commercialization could create a new set of agglomeration dynamics-cost savings-to drive a great technological leap in Shanghai.

"The new, more-open business environment fostered by the FTZ can energize the economic and technological drivers needed to help Shanghai play more of a leadership role in China's overall technological development," he said.

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