FTZ reforms to boost trade, data flows

China will introduce a series of pioneering integrated reforms at its pilot free trade zones to improve areas like trade, investment, finance and cross-border data flows, government officials said on Wednesday.

Speaking at a news conference in Beijing, Sheng Qiuping, vice-minister of commerce, said the proposed reforms will enable the country's FTZs to align with the high standards of international trade, thereby deepening institutional openness and fostering innovation and development across the entire industrial chain.

Despite covering less than 0.4 percent of the nation's territory, China's 21 FTZs contributed more than 18 percent of its foreign direct investment and nearly 18 percent of the country's foreign trade value in 2022.

These figures increased to 18.4 percent and 18.6 percent, respectively, in the first half of this year, according to data released by the Ministry of Commerce.

As the negative list for foreign investment access within China's FTZs has already eliminated restrictions in the manufacturing sector, Sheng emphasized that focus will now shift to expansion of openness in the services sector within the FTZs.

A negative list refers to specific areas of industry where foreign investors are not allowed to operate. They can operate in areas not appearing in the list.

He said the Ministry of Commerce will collaborate with relevant government branches to further prune the negative list for foreign investment access within the FTZs. They will work on introducing a negative list for cross-border trade in services, paving the way for nationwide expansion in the next stage.

Highlighting that China's FTZs are already in line with international standards in trade, investment, finance, shipping, talent and other areas, Sheng said they have introduced numerous fundamental and groundbreaking reform and opening-up measures, leading to several landmark and pioneering institutional innovations.

For instance, 84,000 companies have registered in the China (Shanghai) Pilot Free Trade Zone since its inception 10 years ago. The large number, he said, is testament to the zone's vibrant business environment.

This was made possible by many institutional innovations that were first tried out there, according to information released by the Shanghai municipal government.

Out of the 302 institutional innovations introduced at the 21 FTZs across China, the Shanghai FTZ pioneered 145.

Launched on Sept 29, 2013, the Shanghai FTZ is the first of its kind in China and covers more than 240 square kilometers. China's FTZs underwent expansions in both 2014 and 2019.

Over the years, they have pioneered institutional innovations that contributed to a number of achievements like increased collaboration in promoting industrial growth, open and coordinated development of specialized industries, and more effective resource allocation on a broader scale, said Yang Zhengwei, director-general of the Department of Pilot Free Trade Zones and Free Trade Ports at the Ministry of Commerce.

In terms of investment liberalization and facilitation, the FTZs conducted explorations and promoted a series of institutional innovations that encompass the entire life-cycle management of enterprises, from establishment and changes to operations and exits.

These innovations have played a pivotal role in further optimizing the national investment environment, Yang said.

Following the arrival of a remanufactured engine at Shanghai Pudong International Airport in mid-September, Volvo Construction Equipment (China) became the first company to engage in remanufacturing operations in China, thanks to the favorable policies rolled out by the Shanghai FTZ, said Chen Chaoping, the company's vice-president.

Compared to a new product of the same kind, remanufactured products can save up to 60 percent in energy consumption and reduce emissions by as much as 80 percent, he said.

China's FTZs will continue to function as testing centers for novel trade and government policies, before they can be rolled out at a national level, said Chen Zhenchong, director-general of the Department of Free Trade Zones and Special Control Area under the General Administration of Customs.