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

Video Obama Announces Plan to Send 3,000 Troops to Liberia in Ebola Fight

At US Centers for Disease Control and Prevention, Obama details troop deployment and other pieces of US plan More

Video China Muslims Work to Change Perceptions After Knife Attacks

Muslims in Kunming say that they condemn the violence, it is not a reflection of the true beliefs of their faith More

Humanitarian Aid, Equipment Blocked in Cameroon

Move is seen as a developing supply crisis in West Africa 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.
Enviropreneur Seeks to Save the Environment, Empower the Communityi
X
September 16, 2014 2:06 PM
Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video Enviropreneur Seeks to Save the Environment, Empower the Community

Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video West Trades Accusations Over Ransoms

As world leaders try to forge a common response to the threat posed by Islamic State militants in Iraq and Syria, there is simmering tension over differing policies on paying ransoms. In the past month, the jihadist group has beheaded two Americans and one Briton. Both countries refuse to pay ransom money. As Henry Ridgwell reports for VOA from London, there is uncertainty in the approach of some other European nations.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Washington DC Mural Artists Help Beautify City

Like many cities, Washington has a graffiti problem. Buildings and homes, especially in low-income neighborhoods, are often targets of illegal artwork. But as we hear from VOA’s Julie Taboh, officials in the nation's capital have come up with an innovative program that uses the talents of local artists to beautify the city.
Video

Video US Muslim Leaders Condemn Islamic State

Leaders of America's Muslim community are condemning the violent extremism of the Islamic State group in Iraq and Syria. The U.S. Muslim leaders say militants are exploiting their faith in a failed effort to justify violent extremism. VOA correspondent Meredith Buel reports.
Video

Video Americans' Reaction Mixed on Obama Strategy for Islamic State Militants

President Barack Obama’s televised speech on how the United States plans to “degrade and destroy” the group known as the Islamic State reached a prime-time audience of millions. And it came as Americans appear more willing to embrace a bolder, tougher approach to foreign policy. VOA producer Katherine Gypson and reporter Jeff Seldin have this report from Washington.
Video

Video Authorities Allege LA Fashion Industry-Cartel Ties

U.S. officials say they have broken up crime rings that funneled tens of millions of dollars from Mexican drug cartels through fashion businesses in Los Angeles. Mike O'Sullivan reports that authorities announced nine arrests, as 1,000 law enforcement agents fanned out through the city on Wednesday.
Video

Video Bedouin Woman Runs Successful Business in Palestinian City

A Bedouin woman is breaking social taboos by running a successful vacation resort in the Palestinian town of Jericho. Bedouins are a sub-group of Arabs known for their semi-nomadic lifestyle. Zlatica Hoke says the resort in the West Bank's Jordan Valley is a model of success for women in the region.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid

World Currencies

EUR
USD
0.7722
JPY
USD
107.08
GBP
USD
0.6171
CAD
USD
1.1041
INR
USD
61.075

Rates may not be current.