Beijing suspends free-trade zone applications after nationwide frenzy

PUBLISHED : Thursday, 05 June, 2014, 5:07am
UPDATED : Thursday, 05 June, 2014, 1:04pm

The central government has suspended applications for new free-trade zones (FTZs) in an attempt to cool the nationwide frenzy to compete for the special status given to Shanghai last year, a Communist Party magazine reports.

Xinhua's Outlook Weekly magazine on Monday quoted an anonymous source close to the central authorities as saying that "all application processes for new FTZs have been suspended". State officials were "not satisfied" with the proposals submitted by the regional governments, and had sent them back for revision, the source said.

He Manqing, director of the Institute of Foreign Investment under the Ministry of Commerce, told the South China Morning Post: "Some regional governments just wanted to catch the bus [of FTZ development] first. They had not figured out what exactly a free-trade zone is and if it would work in their region before they submitted their proposals."

More than 20 local governments listed FTZ proposals in their annual work reports this year, with local officials lobbying various central authorities, the magazine reported.

Guangdong, among many other provinces, proposed a pilot zone to foster economic ties with neighbouring regions. Its proposed FTZ encompassing Hong Kong, Macau and parts of the province already had the backing of Beijing, Governor Zhu Xiaodan said in April.

Zhu's comments came after Premier Li Keqiang mentioned in his first work report that China would launch a number of new trials after giving Shanghai the go-ahead to launch the country's first free-trade zone.

The central government "was looking for innovative proposals … But local governments read FTZ as a preferential policy, and wanted to secure funds and land by applying for an FTZ regardless of the region's own characteristics," He said. He added that the central government had also suspended the approval of new economic and technology development zones.

"Many problems surfaced after various regions rushed to set up across the country," He said.

Zhang Yansheng , a top policy adviser to the National Development and Reform Commission, said Beijing had not departed from a wider opening up of the mainland market.

"I don't think the central government has any restrictions on policy innovation. But the regional governments need to figure out what sort of policies currently adopted in the Shanghai pilot free-trade zone they are competing for: pre-establishment national treatment [meaning foreign and domestic investors receive the same treatment], a complete opening up of the service industries or a relaxation of the administrative approval process," Zhang said.

Commentators from Guangdong said the reported FTZ freeze had called a halt for now to the province's plans. It had repeatedly called for approval of a Guangdong-Hong Kong-Macau free-trade zone, they said. The zone would build on the Closer Economic Partnership Arrangement signed between Hong Kong and the mainland in 2003.

"I dare say this [article] reflects the thoughts of [President] Xi Jinping and Li Keqiang and is embarrassing for Guangdong," said Ding Li , regional planning expert with the Guangdong Academy of Social Sciences.

"Guangdong must rethink the difference between 'real reform' and 'fake reform'."