Beijing is more than doubling the number of free-trade zones around the country, giving seven more provincial-level areas the green light to set up their own free marketplaces to boost trade and cross-border investment.
Chongqing, Zhejiang, Hubei, Henan, Sichuan, Shaanxi and Liaoning were given approval to develop the zones, taking the national total to 11, Xinhua reported yesterday.
The decision, which comes ahead of the Group of 20 summit in Hangzhou this weekend, reflects the leadership’s desire to counter slowing growth as it pushes on with efforts to integrate the country into the global economy.
It is also the first time the zones have been endorsed for inland areas.
Commerce Minister Gao Hucheng said the approvals were a milestone in the country’s development of free-trade zones, Xinhua reported.
The zones aimed to meet “high-standard international trading practices”. “The FTZs, covering bigger areas and a wider range of industries, will have their own characteristics and help deepen reforms,” Gao said.
But the authorities have not revealed a timetable for the zones.
The mainland launched its first free-trade zone in Shanghai in late 2013.
Beijing said at the time the zone would be a test bed for full convertibility of China’s currency and a market-based interest rate mechanism.
Then early last year, Beijing gave Guangdong, Fujian and Tianjin approval to set up their own zones, while letting Shanghai quadruple the geographic size of its FTZ.
The yuan has yet to be fully convertible at any of the zones.
There are also growing doubts about prospects for the zones, with foreign businesses accusing the government of making empty promises on liberalisation.
To show its determination to improve conditions for trade and investment, the State Council further relaxed restrictions on foreign investment in the zones last month, allowing freer market access to sectors such as steelmaking, car batteries and shipping.
Tan Jialong, director of Zendai Group’s investment division, said the central government still seemed to be bullish on the outlook for development of the zones. “Top officials are still adamantly pushing ahead with reforms in customs procedures, trade, finance and taxation,” Tan said.
Government researchers have warned the authorities about the threat of rampant cross-border flows of hot money through the free-trade zones.
Gao said risk control would continue to be a major focus as the zones were developed.
In Shanghai, local companies can use their accounts in the FTZ to borrow money offshore.
Chang Zhaohua, chief executive of Shanghai-based MicroPort Medical, said financial liberalisations in the city’s free-trade zone helped his company save up to 20 per cent on interest payments linked to its acquisition of a foreign company.
China’s borrowing costs are higher than those overseas because banks charge interest according to guidelines issued by the central bank.