China halts FTZ applications

Policymakers have suspended applications from local governments to set up free trade zones (FTZ), a media report said Wednesday.

The FTZ application process has been halted, because top policymakers are "unsatisfied" with problems that emerged in the applications, Outlook Weekly, a journal affiliated to the Xinhua News Agency, reported Wednesday, citing an unnamed source familiar with the matter.

More than 20 local governments have listed the establishment of FTZs in their government work reports for 2014, after the Third Plenum decision noted that "China will pick some regions to develop FTZs on the basis of the trial [in China (Shanghai) Pilot Free Trade Zone]."

"The purpose of launching the FTZs is for deepening reforms and further opening-up, but many local authorities have not grasped the central government's intention," the source said.

Wang Xinkui, an expert participating in the draft of the FTZ plan, told the journal that the "FTZ is not a place of preferential policies, but a test ground for institution innovation."

In practice, Wang noted, some local governments still pursue preferential policies when applying for the FTZs, which is in contrast to the central government's blueprint.

Experts said China should not repeat the mistakes made during its establishment of economic development zones in the 1990s.

More than 200 State-level economic development zones and over 6,000 lower-level ones had been approved by the end of the 1990s, according to the report, and this has resulted in problems such as repeated construction and property bubbles.

Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation, estimated that the number of approved FTZs will be no more than 10.

The regions that apply for launching FTZs should have conditions for developing international trade and services trade, Huo said, noting that the FTZs should also play a positive role in boosting regional economic development.