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

Conflicts Engulf Christians in the Middle East

Research finds an increase in faith-based hostilities, and Christians are facing persecution in a growing number of countries in the region More

Iran Bolsters Surveillance of Phones, Internet

Does increased monitoring suggest the government is nervous? 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 Battles Pro-Russia Rebel Assaulti
X
Daniel Schearf
August 29, 2014 9:30 PM
After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.
Video

Video America's Most Popular Artworks Displayed in Public Places

Public places in cities across America were turned into open-air art galleries in August. Pictures of the nation’s most popular artworks were displayed on billboards, bus shelters, subway platforms and more. The idea behind “Art Everywhere,” a collaborative campaign by five major museums is to allow more people to enjoy art and learn about the country’s culture and history. Faiza Elmasry has more.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. Shaikh Azizur Rahman reports from Kolkata.

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.