News / Economy

China Tests New Free Trade Zone in Shanghai

China Tests New Free Trade Zone in Shanghaii
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.
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

Guatemala Mudslide Death Toll Rises to 86

Death toll is expected to continue to rise as emergency crews dig through tons of earth for an estimated 350 people still missing More

Debris Found in Search for Missing Ship

Objects located Sunday have not yet been confirmed to be from the 240 meter container ship, El Faro, which disappeared in the eye of Hurricane Joaquin, according to US Coast Guard More

Survivor: Gunman Spared 'Lucky One' to Give Police Message

Law enforcement official says a manifesto of several pages was recovered; contents not revealed More

This forum has been closed.
Comment Sorting
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.
Russia’s Syria Involvement Raising Concerns in Europei
Luis Ramirez
October 02, 2015 4:45 PM
European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video First Self-Driving Truck Debuts on European Highways

The first automated semi-trailer truck started its maiden voyage Friday, Oct. 2, on a European highway. The Daimler truck called 'Actros' is the first potentially mass-produced truck whose driver will be required only to monitor the situation, similar to the role of an airline captain while the plane is in autopilot mode. VOA’s George Putic reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Migrant Influx Costs Europe, But Economy Could Benefit

The influx of hundreds of thousands of refugees and migrants is testing Europe’s ability to respond – especially in the poorer Balkan states. But some analysts argue that Europe will benefit by welcoming the huge numbers of young people – many of them well educated and willing to work. Henry Ridgwell reports from London.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

Video New Fabric Helps Fight Dust-Related Allergies

Many people around the world suffer from dust-related allergies, caused mainly by tiny mites that live in bed linen. Polish scientists report they have successfully tested a fabric that is impenetrable to the microscopic creatures. VOA’s George Putic has more.

Video Burkina Faso's Economy Deeply Affected by Political Turmoil

Political turmoil in Burkina Faso over the past year has taken a toll on the economy. The transitional government is reporting nearly $70 million in losses in the ten days that followed a short-lived coup by members of the presidential guard earlier this month. The crisis shut businesses and workers went on strike. With elections on the horizon, Emilie Iob reports on what a return to political stability can do for the country's economic recovery.

Video Fleeing Violence, Some Syrians Find Refuge in Irbil

As Syrians continue to flee their country’s unrest to seek new lives in safer places, VOA Persian Service reporter Shepol Abbassi visited Irbil, where a number Syrians have taken refuge. During the religious holidy of Eid al-Adha, the city largely shut down, as temperatures soared. Amy Katz narrates his report.

Video Nigeria’s Wecyclers Work for Reusable Future in Lagos

The streets and lagoons of Africa's largest city - Lagos, Nigeria - are often clogged with trash, almost none of which gets recycled. One company is trying to change that. Chris Stein reports for VOA from Lagos.

Video Sketch Artist Helps Catch Criminals, Gives a Face to Deceased

Police often face the problem of trying to find a crime suspect based on general descriptions that could fit hundreds of people in the vicinity of the crime. In these cases, an artist can use information from witnesses to sketch a likeness that police can show the public via newspapers and television. But, as VOA’s Greg Flakus reports from Houston, such sketches can also help bring back faces of the dead.

Video Thailand Set to Build China-like Internet Firewall

Thai authorities are planning to tighten control over the Internet, creating a single international access point so they can better monitor content. VOA Correspondent Steve Herman reports from Bangkok on what is being called Thailand’s own "Great Firewall."

Video Croatian Town’s War History Evokes Empathy for Migrants

As thousands of Afghanistan, Iraqi and Syrian migrants pass through Croatia, locals are reminded of their own experiences with war and refugees in the 1990s. VOA's Daniel Schearf reports from the town of Vukovar, where wartime scars still are visible today.

Video Long Drought Affecting California’s Sequoias

California is suffering under a historic four-year drought and scientists say even the state's famed sequoia trees are feeling the pain. The National Park Service has started detailed research to see how it can help the oldest living things on earth survive. VOA’s George Putic reports.

VOA Blogs

World Currencies


Rates may not be current.