03/17/2015
China / Economics
The opening of another free trade zone in China this week is linked to China’s goal of generating quality economic growth.
The Guangdong Free Trade Zone (FTZ) will open on Wednesday (March 18) and is expected to deepen economic integration between Guangdong, Macau and Hong Kong.
It is the latest in a list of FTZs established since the 2013 creation of the Shanghai FTZ, which was recognized as a crucial economic reform initiated by China’s new leadership. The expansion of the FTZ program will test reform policies in a broader area. It will also allow pilot measures in place in Shanghai to be tried in other regions. To achieve quality growth, policymakers will open up the economy further by establishing more FTZs.
Some of the measures provide easier access to private capital and further open up the service sectors. One important breakthrough was the adoption of a “negative list” to ease the process of investment approvals inside the zone. As at November 2014, a total 14,000 new companies were set up. Among them, 2,114 were overseas companies, 10 times the number in the previous year.
Thanks to the streamlined application procedures, outward investment accelerated in the zone as well. A total 160 overseas investment projects were completed by end-2014, with the total amount of foreign investment from Chinese companies reaching Chinese yuan 3.8 billion. The adoption of a “Go Abroad” strategy by mainland companies is pivotal for China to achieve a more balanced balance of payments.
Such a process allows mainland companies to broaden their business scope and transfer some excess capacity to foreign countries. This is one of the policy aims of the “One Belt, One Road” initiatives.
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