News / Economy

    China Tests New Free Trade Zone in Shanghai

    China Tests New Free Trade Zone in Shanghaii
    X
    September 26, 2013 6:06 PM
    At the beginning of next month, China is expected to unveil a new type of free trade zone in Shanghai that some speculate could serve as a model for a more open and liberal Chinese economy. Although critics say the proposed zone is all hype, others believe it could be a small - albeit cautious - step toward loosening the state’s tight economic controls. VOA’s Bill Ide has more from Shanghai.
    Early next month, China will unveil a new kind of free trade zone in Shanghai.  Despite a lack of details about the area, which will include 29 square kilometers of Shanghai’s Pudong district, it is already being showcased as a window into a more liberal Chinese economy.
     
    The Chinese economy is slowing and there are growing concerns about property bubbles and rising debt.  In an effort to breath new life into the economy, China’s new leaders are searching for ways to turn the country into something more than a global manufacturing powerhouse.
     
    “In China, we have realized that the manufacturing of products has used up resources and damaged the environment,” said Sun Lijian, an economics professor at Shanghai’s Fudan University.  “Today, we need to use this model to bring about the transition towards a more high-level growth model, so we want to do more in the service sector, do more research and development, and more exchange of talent.”
     
    The new zone could lead to the liberalization of more than a dozen industries.  The free exchange of China’s currency - the yuan - is expected to be a key component of the zone, which will include four customs areas in which goods can be stored and avoid value added taxes or tariffs.
     
    China has long relied on exports and investment to spur its growth, but that approach has reached its due date, said Shaun Rein, managing director of the China Market Research Group.
     
    “China’s government now is switching more towards domestic consumption and services,” said Rein.  “In order to really boost up consumption and services, the government has to attract a different type of foreign investor and has to boost domestic spending in a different way.”
     
    Rein said the opening of the new zone is hoped to attract more foreign investment, banking services, insurance and more creative technologies.  Right now, said Rein, Shanghai’s economy relies too much on heavy investment, particularly real estate.
     
    You make the cake
     
    In the past, it was the government that took the lead in boosting investment and growth.  However, the new zone seeks to change that by giving investors the tools to create money-making opportunities, instead of handing it over to them like cake.
     
    Fudan University’s Sun said that is why the government is taking a more hands off approach.
     
    “We must change the approach where the government takes the lead in investment and instead let the market determine demand and where investments should go,” Sun said.
     
    A man looks at his iPad in front of the financial distric in Shanghai on Sept. 24, 2013.A man looks at his iPad in front of the financial distric in Shanghai on Sept. 24, 2013.
    x
    A man looks at his iPad in front of the financial distric in Shanghai on Sept. 24, 2013.
    A man looks at his iPad in front of the financial distric in Shanghai on Sept. 24, 2013.
    Taking a small step in Shanghai could lead to reforms elsewhere.
     
    “The idea is that if you have a more market oriented financial system in this free trade zone, that’s going to create a much healthier financial system throughout the entire country,” Rein said.
     
    News of the plans has other regions in China lining up to receive the same treatment.  When the government approved the plan for Shanghai in August, Tianjin Zhoushan and cities in Guangdong also started seeking free trade zones of their own.
     
    Hong Kong is also watching developments cautiously, and earlier this month Li Ka-shing said the port city needs to raise its competitiveness if it doesn’t want to loose out to Shanghai.  Li is one of Asia’s richest men and chairman of the Hong Kong-based companies Cheung Kong Holdings and Hutchison Whampoa Limited.  
     
    “Every city in China basically wants to have a free trade zone like this because they know it’s going to boost investment, employment and GDP growth, but the government here tends to be very cautious,” said Rein. “They like to put up a trial balloon like a free trade zone or duty free and let that run for five or 10 years.”
     
    Opportunities and risks
     
    On the other hand, Professor Sun believes change could come sooner if the pilot program in Pudong is a success.
     
    But he said the main reason the plan is being rolled out on such a small scale is because there are risks that come with it.   Sun said not only are there concerns the freeing up of financial restrictions could lead to the flight of capital from the country, but there are also concerns speculation could run rampant.

    “There are fears that people who enter this zone and are given the tools to make the cake will instead use those tools to do bad things,” Sun said.
     
    China is concerned that if it doesn’t carry out reforms correctly it could run into the same problems its Asian neighbors have had in the past.

    You May Like

    US Leaders Who Served in Vietnam War Look Back and Ahead

    In New York Times opinion piece, Secretary of State John Kerry, Senator John McCain and former Senator Bob Kerrey say as US strengthens relations with Vietnam, it is important to remember lessons learned from war

    Who Are US Allies in Fight Against Islamic State?

    There is little but opportunism keeping coalition together analysts warn — SDFs Arab militias are not united even among themselves, frequently squabble and don’t share Kurds' vision for post-Assad Syria

    Learning Foreign Language Helps US Soldiers Bridge Culture Gap

    Effective interaction with local populations part of everyday curriculum at Monterey, California, Defense Language Institute

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Bill Gates from: Hong Kong
    September 27, 2013 12:51 AM
    Trade has been going on for 5000 years in all places, among all people...

    china missed the science -age /industrial age or invent the internet/information / iphone/iphone or cloud computing..

    china is NOT center world. there are 200 plus nations on earth with 7 billion people.

    Trade, trade, trade, trade has been going on for the last 2000 years now. let the people trade.

    Free trade for all people. Free trade for all china...

    by: Yoshi from: Sapporo
    September 26, 2013 9:10 PM
    This article says Hong Kong is also watching developements (of free marcket zone?) cautiously. Does this mean Hong Kong has not been allowed free marcket since it was retured to China?

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8916
    JPY
    USD
    109.40
    GBP
    USD
    0.6905
    CAD
    USD
    1.3147
    INR
    USD
    67.522

    Rates may not be current.