Fewer provinces apply for FTZs

Local govts seek other growth options

Seven provincial governments in China have announced plans to apply to open free trade zones, down from the figure of 22 in 2014, indicating that some local authorities have turned to other schemes to boost their economies, experts said on Monday.

By Monday, 28 of China's 31 provinces, municipalities and autonomous regions had held sessions of the local legislative and consultative bodies, in which they mapped out priorities in their local government work reports.

Among them, Central China's Hubei and Henan provinces, Northwest China's Shaanxi and Gansu provinces, South China's Guangxi Zhuang Autonomous Region, East China's Shandong Province, and Liaoning Province in Northeast China expressed their intention to apply for approval to open an FTZ in their 2015 government work reports.

In the 2014 work reports from China's 31 provincial-level governments, 22 of them, including North China's Hebei Province, East China's Zhejiang Province, and Northwest China's Xinjiang Uyghur Autonomous Region, said they wanted to set up FTZs.

"Local governments now treat FTZ applications more rationally," said Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, on Monday.

Some have realized that they lack the necessary competitive edge in comparison with other provinces and regions, Xu told the Global Times.

He noted that the seven applicants this year "indeed have their advantages in terms of trading and overseas cooperation," mentioning Liaoning and Shandong as examples of this.

The provincial government of Liaoning said in late January that it would actively push forward the FTZ application process. It plans to set up an FTZ in Dalian, a coastal city in the province.

The competition between inland provinces like Hubei, Shaanxi and Gansu is likely to be fierce, and they may not all get a green light for FTZs, Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Monday.

Gansu is the only one of the seven provinces to have announced its FTZ ambitions for the first time. The local government said in its work report that an FTZ would be based on the New Area in the provincial capital of Lanzhou.

The FTZ application filed by Gansu has been transferred to the Ministry of Commerce by the State Council, the Xinhua News Agency reported Sunday.

Some cities are unlikely to get FTZ approval immediately, but this does not mean they cannot adopt the reforms piloted in the existing Shanghai FTZ, said Bai.

Various FTZ policies such as the "negative list" approach to foreign investment are suitable for almost every city in China and may gradually be applied nationwide, Bai said.

Analysts also noted that an FTZ is not the only way to pursue reforms and find new growth potential.

Some provincial governments have decided to file for the establishment of other pilot zones this year.

For instance, Zhejiang, which planned to set up an FTZ in Zhoushan in 2014, has proposed creating a comprehensive pilot zone for cross-border e-commerce in Hangzhou, where leading e-commerce firm Alibaba Group is headquartered.

Also, provincial-level regions including Southwest China's Tibet Autonomous Region and North China's Inner Mongolia Autonomous Region have emphasized their desire to participate in the "One Belt, One Road" initiative proposed by Chinese President Xi Jinping to boost productivity.

Both Bai and Xu noted that China will create more FTZs in the coming years so as to speed up reforms and the opening-up of local provinces amid slowing economic growth.

"FTZs will be encouraged, as they will have policies in place that should benefit not only a province but also its nearby regions, pushing forward reform of the whole economic mechanism," said Xu.

"This is different from previous special economic zones, in which local governments usually issued polices exclusively favorable to local firms," said Xu.

Bai noted that China needs more FTZs, especially in western regions.

China announced approval for three new FTZs in South China's Guangdong Province, North China's Tianjin Municipality and East China's Fujian Province in December 2014, following the launch of the country's first FTZ in Shanghai in September 2013.