Chinese cities swim toward free trade ports

By Xie Jun Source:Global Times Published: 2018/2/11 19:18:39

Updated zones should find own characteristics to avoid repetition: experts

A view of Shanghai's free trade port, which was established by the Chinese government as one of the country's major aspects of its further opening-up. Its success can help the development of other ports as well as be a major service to China's Belt and Road initiative. Photo: IC

China has been putting a lot of effort into building free trade zones (FTZs) in recent years. Now the efforts are going one step further, with the central government calling for the establishment of free trade ports, which will supposedly derive from the existing FTZs.

According to a report released by on January 31, more than 10 provinces and cities across China said they will "actively explore [the possibilities] of establishing free trade ports."

Those regions not only include coastal cities and provinces like Shanghai, East China's Zhejiang Province, South China's Guangdong Province and East China's Fujian Province, but also include inland provinces like Southwest China's Sichuan Province.

According to a report released by the Xinhua News Agency in October 2017, the Ministry of Commerce is working toward establishing FTZs along with relevant provinces, cities and departments.

In Shanghai, the blueprint for free trade port establishment is even clearer. According to media reports, the major player of the Shanghai free trade port initiative will operate in the Yangshan port area, while the Shanghai International Port (Group) Co will work with Zhejiang companies to further develop northern Yangshan.

Yang Rongjun, a spokesman for Shanghai International Port (Group) Co, confirmed to the Global Times on Wednesday that the company is still waiting for detailed guides from the government regarding the establishment of the Shanghai free trade port.

According to the report, the first batch of domestic free trade ports will likely be disclosed after the annual NPC and CPPCC sessions.

Historical update

The Chinese government's efforts to develop free trade areas started in August 2013, when the first FTZ was set up in Shanghai.

In the following years, the government has gradually updated the functions of the FTZ there, as well as set up FTZs in other provinces. So far, China has set up 11 FTZs overall.

Tao Jian, who previously worked as the director of the finance department under the Shanghai Pilot Free Trade Zone Coffee Exchange, told the Global Times on Thursday that China's FTZs benefit from government policies.

He added that not only are they restricted to special management methods like the "negative list" approach as well as free trade accounts, which facilitate overseas trade, but also, the overall environment in FTZs tends to be more risk-tolerant compared with the outside.

"Officials in the FTZs tend to give the green light to any innovative ideas. They encourage companies to trial them instead of suppressing them," Tao told the Global Times.

He also said that the government has been perfecting the FTZs in recent years.

Such improvements included tailored, government-led industrial guidance for each of the seven new FTZs set up in March 2017, preventing vicious competition among them.

The FTZ in Zhejiang, for instance, focuses on bulky commodity trade as the province is more competitive in this area.

Wu Minghua, a Shanghai-based independent shipping industry analyst, said that the construction of the free trade ports will start with updating the functions of the existing FTZs.

According to a statement published by the State Council, China's cabinet, in March 2017, the first free trade ports will be set up in the Yangshan duty- free zone and the Shanghai Pudong International Airport integrated duty- free zone, both of which are parts of the Shanghai FTZ.

"The Shanghai free trade ports will start with airports and sea ports in the Shanghai FTZ, and gradually, the whole of the Shanghai FTZ will be upgraded to free trade ports," Wu told the Global Times on Thursday.

According to Wu, compared with FTZs, free trade ports will adopt a more open management system.

"For example, in free trade ports, there won't be any restrictions on the use of foreign currencies. Also, the government  won't be imposing any taxes. Those policies have not been fully implemented in the FTZs, as there is still a certain level of capital restriction and tax charges in those areas," Wu noted.

Sang Baichuan, director of the Beijing-based Institute of International Business at the University of International Business and Economics, said that there are two types of free trade ports, one specializing in offshore trade and the other having comprehensive functions.

"The free trade ports in coastal areas like Shanghai can specialize in trade, while inland cities can be the homes to free trade ports that are multi-functional, including developing financial services."

Wu noted that the focus of setting up free trade ports does not lie in infrastructure construction like "building a new port or a new airport." Instead, the focus is on how to embrace institutional innovation in customs, tax and investment.

Finding individuality

But the experts the Global Times talked to cautioned that it's not necessarily a good sign that all provinces are scrambling to set up free trade ports.

"There have already been too many FTZs," Sang said, adding that many of them have been repetitive constructions.

"For the free trade ports, I think it's important to make detailed plans and to clarify the [different] functions of each of them," he said.

Wu said that there will likely be three or four free trade ports established in China in the future.

"I think it's better to set up one free trade port at first, and then expand the experience of it, if it's successful, to other provinces and cities," he noted.

According to Wu, it's important that the domestic free trade ports differentiate from each other and have their own characteristics.

For example, the free trade port in Ningbo of East China's Zhejiang Province could specialize in energy trade due to its advantages in the industry sector, Wu said.

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