Shanghai Free Trade Zone: What Can We Look For?

By Jingyu Lu

 

In September 2013, Shanghai again stepped into the spotlight as China’s economic pioneer, facing the global markets. The first Free Trade Zone in this country was launched there and simultaneously brought up many questions. One of them was whether Chinese government is going to build Shanghai another Hong Kong, in terms of economic function?

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Backed by Premier Keqiang Li who just assumed his new office, Shanghai Free Trade Zone acts as one of the most forceful measures through which Chinese government strives to deepen the economy reforms and open up markets. However, different from traditional Free Trade Area, in which multiple countries participate and reach consensus on cooperation policies, Shanghai Free Trade Zone sets its own rules and attracts foreign enterprises by preferential policies. So many people still remain skeptical on the effectiveness of the initial.

 

But in the first place, let’s have a glance at the unique offers in Shanghai Free Trade Zone. If you have a one-day tour there, taking the area privilege, you can first open a bank account in a foreign bank and compare the deposit rate with the domestic banks’, considering where is more economical for your savings. Withdrawing some cash, you can buy a video game that has been banned in China since 2000 as a gift for your friend. Also you can pay a visit to a foreign travel agency and sign up an overseas tour for your family. Or if needed, lawyer service, HR consulting service, engineering design, private schools and construction service provided by foreign enterprises are all available for you. For wrapping up the tour, you can enjoy the night at a foreign pub. In addition, if you unfortunately get injured during the tour, the wholly foreign-owned hospital should take a considerate care of you.

 

It seems Shanghai Free Trade Zone largely looses the restrain on foreign enterprises and brings them in to serve local residents. But what is behind the obvious is that Chinese government intents to exert the imported competition to foster new national advantages. Determining to transfer economy structure from low-value-added manufacturing to high-quality industries, Chinese government is exploring different developing patterns, and acquiring experience from foreigners is one of its means.

 

Also Shanghai Free Trade Zone has a unique strategic function: strengthening the connection between China’s economy and the rest of the world, in order to defense its position in international trades. A Chinese scholar, Daqin Yang, pointed out that since China’s entry into WTO, the US has formed other trade alliances with Pacific countries (TPP), European countries (TTIP) and worldwide trade partners (PSA). Without exception, all these trade agreements eliminated China, the biggest export country and second biggest import country. Chinese government senses the threat and utilizes Shanghai Free Trade Zone as a window to keep touch with the global economy.

 

However, this is not the end of the story. Shanghai Free Trade Zone provides superior environment not only to foreign capital but also to domestic investors. Preferential policies on taxes, company registration, RMB exchange and so forth have lured a number of Chinese entrepreneurs even before the launching of Shanghai Free Trade Zone. This is also Chinese government’s intention that in a more company-friendly circumstance, opportunities can be open up to more people with creative ideas and passionate ambition. And the prosperity of private capital is expected to become another driver of China’s further development.  

 

The perspective of Shanghai Free Trade Zone seems promising, given government supports and a clear guideline. However, doubts are still there. Are the preferential policies attractive enough for foreign enterprises? Will the introduced competition be a threat or an engine for domestic companies? Is Shanghai Free Trade Zone free enough to nurture new power for Chinese economy? And is it feasible to popularize the Free Trade Zone pattern all over the country even if Shanghai succeeds.

 

The answers will emerge along with the unfolding of the practice. But so far, Zhiming Zhou, who wanted to extent his international business by setting up a trade company in Shanghai Free Trade Zone, has already tasted the benefits. Mr. Zhou only spent four days to complete the new company registration, which was a progress, because it usually takes over one month outside the Free Trade Zone.

 

References:

Video Introduction of Shanghai Free Trade Zone:

http://www.youtube.com/watch?v=GWpcIjmdJUo

 

Shanghai Free Trade Zone and International Trade:

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20131027000004&cid=1703

 

Preferential Policies:

http://en.shftz.gov.cn/Service%20industry.html

 

 

 

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