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.
William Ide
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

UN: 1 Million Somalis at Risk of Hunger

Group warns region is in dire need of humanitarian aid, with at least 200,000 children under age of five acutely malnourished as drought hits southern, central part of nation More

Human Rights Groups Allege Supression of Freedoms in Thailand

Thailand’s military, police have suppressed release of independent report assessing human rights in kingdom during first 100 days of latest coup More

Jennifer Lawrence Contacts FBI After Nude Photos Hacked

'Silver Linings Playbook' actress' photos were posted on image-sharing forum 4chan; Federal Bureau of Investigations is looking into matter More

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.
Ukraine Schools Resume Classes, Donate to Government Forcesi
X
September 02, 2014 12:58 PM
A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Internet, Technology Offer New Tools for Journalists

The Internet and rapidly evolving technology is quickly changing how people receive news and how journalists deliver it. There are now more ways to tell a story than ever before. One school in Los Angeles is teaching the next generation of journalists with the help of a state-of-the-art newsroom. Elizabeth Lee has this report.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.