FTZs to aid nation in efforts to compete with established rivals

China’s new pilot free trade zones are expected to increase the nation’s flexibility to compete with more established rivals in the Asia-Pacific region, experts said on April 21.

A FTZ refers to an area within which goods can be imported, processed and re-exported without the intervention of customs authorities. Foreign investment also has the chance to enter the fields which are still restricted outside the zone.

The government on April 21 officially added Tianjin, Guangdong and Fujian into its pilot free trade zone list after the first FTZ－the China (Shanghai) Pilot Free Trade Zone－was unveiled in the financial hub of Shanghai 18 months ago, which was designed to simplify the often cumbersome official approval system and encourage innovation and internationalization.

Liu Chenyang, a researcher at the APEC study center at the Tianjin-based Nankai University, said establishing more free trade zones will be inevitable due to the other FTZs such as those in Taiwan facing Fujian province across the Straits and Hong Kong, Busan in South Korea and Singapore.

“The nation certainly cannot afford to be detached from the FTZs ... China has been keen to play a bigger role in the free trade chain not only in East Asia, but in the whole Asia-Pacific region. Quality FTZs can enable it to reach this goal,” said Liu.

The overall plan of the Tianjin FTZ identifies clear functions for three areas－the North Port Area of Tianjin Port, Binhai New Area CBD and Tianjin Airport Area with different priorities to develop maritime and air logistics, financial services, high-end manufacturing industries such as aircraft and aerospace.

Guangdong Governor Zhu Xiaodan said the Guangdong FTZ will enhance in-depth cooperation between the Chinese mainland and Hong Kong and Macao, and further remove or relax market access limits for investors from both regions, including requirements on qualifications, restrictions on equity ratios and limits on business scope.

The newly established Guangzhou Intellectual Property Rights Court will explore ways to build a rapid protection mechanism to protect the interest of all these companies. International arbitration and commercial mediation systems will also be instituted.

The Fujian FTZ is strategically positioned on the western side of the Taiwan Straits, and is expected to be a demonstration area for intensified economic cooperation across the Straits and a core area of the 21st Century Maritime Silk Road.

The modern Maritime Silk Road begins in major port cities of Fujian and Guangdong provinces and heads south into the ASEAN region. From the Strait of Malacca, it then turns west to South Asia, the Persian Gulf region and Europe.

By the end of its first year, the Shanghai FTZ had managed to attract nearly 12,000 registered enterprises on the back of a better trade and investment environment.

The FTZ fever has caught the attention of officials across the country, especially in major cities such as Chengdu, Dalian and Qingdao, with many pushing for their regions to be included in the country’s next batch of FTZs.

Lin Guijun, vice-president at the University of International Business and Economics in Beijing, said although the new FTZs may unavoidably develop toward uniformity in financial services, fierce competition among them will eventually result in a shift to policy optimization and infrastructure improvement, as well as in attracting talent and foreign capital.

For foreign businesses, Lin said, many undeveloped social service industries such as education, social security, and health and elderly care can become market growth points, as demand in these areas has surged over the past decade.

Li Wenfang in Guangzhou and Sun Li in Fuzhou contributed to this story.