Expanded free trade zones will help ease economic pressures – China

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At a time when the United States is further closing the door on trade with China, it makes sense for Beijing to improve ties with neighbouring countries. The announcement of six more pilot free trade zones. (FTZs) in strategic border regions ensures the widening of reforms and greater opening up. They will be testing grounds for new ideas that, if successful, can be rolled out nationwide. There is no better approach to helping weather the trade war while expanding the reach of national strategies like the Belt and Road Initiative.

The FTZs will be in regions that can capitalise on existing initiatives or are in need of greater development. Each has been chosen for its geographic location and authorities will focus on attaining a specific goal. The FTZ in the northeast rust-belt province of Heilongjiang will focus on a logistics hub with Russia; Shandong’s east coast FTZ aims to build economic partnerships with Japan and South Korea; the Hebei FTZ seeks to integrate Beijing, Tianjin and Hebei through big data, digital trade and sustainable finance; Jiangsu’s FTZ will turn to overseas investment cooperation; the Guangxi autonomous region, which borders Vietnam, will use its FTZ to improve transport from the coast to the western hinterland while improving links between China and the Association of Southeast Asian Nations; and the FTZ in landlocked Yunnan province, next to Vietnam, Laos and Myanmar, will look to the same role.

Each FTZ has a challenging goal, but the success rate of the model is inspiring. The first, established in Shanghai in 2013, led to initiatives including the easing of restrictions on currency exchange, foreign participation in the nation’s e-commerce sector, and greater efficiency for registering local and overseas companies. With the addition of the six new zones, China will have a total of 18 and a solid track record to encourage and motivate. There have already been 171 successful pilot reform plans, with a number launched nationally.

China’s economic gains have often been made through first rolling out reforms on a small scale in specific areas and, if successful, adopting them more widely elsewhere. Special economic zones led the way in the 1970s and 1980s, with Shenzhen, neighbouring Hong Kong, being the pioneer. The city, now a hi-tech powerhouse, has again been chosen to trial innovative ideas that others may one day follow. Its proven track record of effective policymaking gives it a special standing within China.

The FTZs previously established have similarly proven their worth; they have already brought in 12 per cent of the nation’s foreign direct investment and the same percentage of trade with other countries. Given the economic pressures China faces and the necessity of greater reform, expanding the model makes sense.

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