Wednesday, April 05, 2017

New FTZs to Boost National Policies, Grow Inland Regions
2017/4/4 19:53:39

A car travels past a sign for the China (Zhejiang) Pilot Free Trade Zone in Zhoushan city, East China's Zhejiang Province, 31 March, 2017. Photos: IC

A third group of free trade zones (FTZ), including seven Chinese provinces and municipalities started operation on Saturday.

The State Council last week approved the seven new zones in the provinces of Liaoning, Zhejiang, Henan, Hubei, Sichuan and Shaanxi as well as Chongqing Municipality, according to an official statement released Friday.

China established its first FTZ in Shanghai in 2013, and added parts of Tianjin, Fujian and Guangdong later. The new FTZs have brought the total number of zones to 11.

Ministry of Commerce statistics show that more than 90,000 companies were set up in four trade zones as of 2015. In the first half of 2016, 4,923 foreign-funded firms were established in the four FTZs, with investment totaling 359 billion yuan ($52.2 billion), 10 percent of the country's total foreign investment.

The first two sets of zones successfully introduced a "negative list," which specified the investment sectors that are off-limits to foreign investors and allowed industries not on the list to follow the same new investment rules as domestic firms.

Pushing national strategies

So far, about one-third of Chinese provincial-level areas have FTZs. Five of them are inland and six are along the coast.

Observers said FTZs will help carry out major national endeavors such as the Belt and Road initiative, the Yangtze Economic Belt and the development of central and western China.

Liaoning Province will focus on reinvigorating the Rust Belt, an industrial area in China's northeast. Zhejiang is expected to capitalize on its e-commerce power and develop bulk commodities businesses. Henan will use its strategic location in China's heartland and grow stronger as a regional logistics hub. Hubei will spearhead the building of the Yangtze Economic Belt, named after the river that flows through the province. Chongqing and its neighbor, Sichuan, will be built in an inland area for opening-up. Shaanxi will seek to develop cultural and economic relations with countries along the Silk Road.

"The plan for the FTZs reflects that China wants to build an open economy as a whole, but before doing that, it has to experiment with FTZs in different parts of the country," said Lu Shanbing, deputy director of the Xi'an-based Silk Road Research Institute of Northwest University.


Lei Hongli has worked at the Henan Airport Group for 21 years. When she started her job at the Zhengzhou airport, she had little occasion to use her English skills.

"There were just a few foreign planes. Mostly they were domestic flights carrying vegetables, animal hides and chickens," she said.

In 2016, nearly half a million tons of cargo were transported through Zhengzhou airport, and over 50 percent were international cargo, said Lei, assistant to the general manager of the Henan airport group.

"Few international consignors knew about Zhengzhou a few years ago, but now it is one of the most popular airports for handling cargo," she added.

Wieger Ketellapper, vice president of Cargolux Airlines International, spends at least three weeks every month in Zhengzhou.

"In 2014, we moved 15,000 tons, and the number reached 100,000 tons in 2016," Ketellapper said.

"The FTZ will be an important 'soft infrastructure' that will enable Henan to fully use its hard infrastructure," said John D. Kasarda, director of the Center for Air Commerce at the University of North Carolina's Kenan-Flagler Business School and president of the Aerotropolis Institute in Zhengzhou.

Kasarda noted that there are three fundamental objectives for the Henan FTZ. First is capitalizing on its status as an international logistics hub. Another is leveraging high-end manufacturing and services to move up the value chain. The final aim is the liberalization and deregulation of areas such as currency conversion and the free flow of capital, he said.

Different approaches

Experts believe the key to the new FTZs, which are important for the opening-up of the country's landlocked central and western regions, is finding their own focuses.

"The first and second groups of FTZs are based in the country's most developed coastal regions. Their successful experience would not necessarily work for inland areas," said Xing Houyuan, deputy director of the service outsourcing research center of the Ministry of Commerce.

There is a gap between coastal and inland areas in terms of development and governance, and they have different industrial advantages, according to Xing.

The coastal FTZs have proven effective in stimulating regional economies, but it could be a challenge for the third group, located in relatively backward areas, to attain similar effects, she said.

"We expect more specific policies to be made in accordance with the FTZ status in Henan and, more importantly, in line with the conditions and realities of individual areas," said Du Mingjun, an economics researcher in Henan.


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