2nd Ld Writethru-Xinhua Insight: More free trade zones to open in China

A third group of free trade zones (FTZ), including seven Chinese provinces and municipalities, will start operation on April 1, local authorities said.

The State Council has approved the seven new zones in the provinces of Liaoning, Zhejiang, Henan, Hubei, Sichuan and Shaanxi as well as Chongqing Municipality, according to an official statement released Friday.

China established its first FTZ in Shanghai in 2013, and expanded to three more provincial-level areas of Tianjin, Fujian and Guangdong. The new FTZs will bring the total number of the zones to 11.

The decision carries strategic importance in terms of opening up and reform, cutting bureaucratic red tape and exploring financial innovation, according to the statement.

Statistics with the Ministry of Commerce show more than 90,000 companies were set up in four trade zones as of 2015. In the first half of 2016, 4,923 foreign-funded firms were established in the four FTZs, with investment totaling 359 billion yuan.

The first two sets of zones successfully introduced a "negative list," which specified the investment sectors off-limits to foreign investors and allowed industries not on the list to follow the same new investment rules as domestic firms.

The four FTZs have attracted 10 percent of the country's total foreign investment and accumulated R&D power, entrepreneurship, e-commerce and trade projects, experts said.

PUSHING FORWARD NATIONAL STRATEGIES

So far, about one-third of Chinese provincial-level areas have FTZs. Five of them are in inland provinces and six are along the coast.

Observers said FTZs will help carry out major national endeavors such as the Belt and Road initiative, the Yangtze Economic Belt and the development of central and western China.

Liaoning Province will focus on reinvigorating the Rust Belt, an industrial area in China's northeast. Zhejiang is expected to capitalize on its e-commerce power and develop bulk commodities businesses. Henan will use its strategic location in China's heartland and grow stronger as a regional logistics hub. Hubei will spearhead the building of the Yangtze Economic Belt, named after the river that flows through the province. Chongqing and its neighbor, Sichuan, will be built in an inland area for opening-up. Shaanxi will seek to develop cultural and economic relations with countries along the Silk Road.

Li Qian, director of Chongqing FTZ management office, said Chongqing, through its efforts to build land trade routes with Europe, will help set the rules for land trade, as compared to trade via marine routes.

"An FTZ will get Chongqing more policy favors when it joins the international competition as a cargo trade hub," Li said.

"The plan for the FTZs reflects that China wants to build an open economy as a whole, but before doing that, it has to experiment with FTZs in different parts of the country," said Lu Shanbing, deputy director of the Silk Road Research Institute of Northwest University.

"The FTZs will not prioritize a certain area, rather, they will help coordinate development between the mid-west and the east and close the gaps," he said.

TAKING-OFF

Lei Hongli has worked at the Henan Airport Group for 21 years. When she started her job at the Zhengzhou airport, she had little occasion to use her English skills.

"There were just a few foreign planes. Mostly they were domestic flights carrying vegetables, animal hides and chickens," she said.

In 2016, nearly half a million tonnes of cargo were transported through Zhengzhou airport, and over 50 percent were international cargo, said Lei, assistant to the general manager of the Henan airport group.

"Henan is neither near the sea nor any border, so it has put up its strength to develop air transport," she said.

"Few international consignors knew about Zhengzhou a few years ago, but now it is one of the most popular airports for handling cargo," she added.

Wieger Ketellapper, vice president of Cargolux Airlines International, spends at least three weeks every month in Zhengzhou.

The company operates 15 flights a week between Luxembourg and Zhengzhou. In 2017, the number will reach 17. The planes bring in luxury consumer goods, fruit, car parts, aircraft parts, and helicopter parts to China and transport electronics, fashion goods and machinery parts out of the country.

"In 2014, we moved 15,000 tonnes, and the number reached 100,000 tonnes in 2016," Ketellapper said.

"The FTZ will be an important 'soft infrastructure' that will enable Henan to fully use its hard infrastructure," said John D. Kasarda, director of the Center for Air Commerce at the University of North Carolina's Kenan-Flagler Business School and president of the Aerotropolis Institute in Zhengzhou.

Kasarda noted that there are three fundamental objectives for the Henan FTZ. First is capitalizing on its status as an international logistics hub. Another is leveraging high-end manufacturing and services to move up the value chain. The final aim is liberalization and deregulation of areas such as currency conversion and the free flow of capital, he said.

DIFFERENT APPROACHES NEEDED

Experts believe the key to the new FTZs, which are important for the opening-up of the country's landlocked central and western regions, is to find their own focuses.

"The first and second groups of FTZs are based in the country's most developed coastal regions. Their successful experience would not necessarily work for inland areas," said Xing Houyuan, deputy director of the service outsourcing research center of the Ministry of Commerce.

There is a gap between coastal and inland areas in terms of development and governance, and they have different favorable industries, according to Xing.

The coastal FTZs have proven effective in stimulating regional economies, but it could be a challenge for the third group, located in relatively backward areas, to attain similar effects, she said.

"We expect more specific policies to be made in accordance with the FTZ status in Henan and, more importantly, in line with the conditions and realities of individual areas," said Du Mingjun, an economics researcher in Henan.

"In attracting investors and trade, Henan, for example, has to look at its advantages and disadvantages and put its strength in places where it can develop best," he said. Endi