Free trade zones in Shanghai are nothing new, so what is the excitement about?
“At last, on September 29th, the [free trade] zone was launched. Leaders called it a landmark moment, similar to the creation of the Shenzhen special economic zone near Hong Kong more than three decades ago that ushered in reforms and spectacular growth. At a press conference, officials used the word “innovation” 43 times.” –The Economist
China opened a new free trade zone in Shanghai on Sunday in what has been hailed as potentially the boldest reform in decades, and gave fresh details on plans to liberalize regulations governing finance, investment and trade in the area. -Reuters
Throughout the past two years I have spent a considerable amount of time around the hinterlands of Shanghai, hanging out in resident-strapped new towns, deserted new cities, stumbling through smokestack forests, and staring at more rusted up iron contraptions at industrial ports than any traveler seeking sensual satiation ever should.
On various occasions I’ve found myself outside the gates of Shanghai’s free trade zones — Waigaoqiao, Yangshan, Pudong Airport — poking around in some scarcely populated new development that’s supposed to serve them someday. So I was left a little perplexed when at the end of September, 2013 when an all out media barrage was released announcing the commencement of Shanghai’s “new” Free Trade Zone. Shanghai has had free trade zones for years, why was this news all of a sudden?
“What is with all the current hype about Shanghai’s new free trade zone when they’ve already had them for years?” I asked a development consultant from Colliers who was leading a team in Nanhui, near the Yangshan Free Trade Zone. I was thinking that someone more on the inside track of China’s financial sector could shed some light on this. But the consultant just shrugged, “Now the government wants people to talk, so they put it in the media and now everybody is talking.”
I asked the same question to a project manager at an architecture firm who had been working at the edge of an FTZ for years, and she replied, “With the installation of these new free trade areas, Lingang and Yangshan are mention but it has actually been a free trade zone for 10 years now. It’s not new, it’s just that it’s labeled new and put together with the other zones so it receives a lot of attention now. But it has been a free trade zone since early on.”
Free Trade Zones in Shanghai are nothing new, what is new is what they are supposed to soon offer. Four free trade zones — Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area, and Pudong Airport Comprehensive Free Trade Zone — that have been growing up in pockets around the eastern and northern fringes of Pudong have now been joined together into one massive, coordinated, and singularly regulated zone, whose full extent has yet to be determined. Some say it may cover the entire coastal span of Pudong, others say it may swallow all of Pudong district. Whatever is the case, the area that will be deemed “free trade” may soon be drastically increased. But what has gotten people’s attention are the new loosening up of regulations governing trade in this zone. Foreign enterprises, such as banks, will be permitted to set up in China for the first time, wholly foreign owned companies will be allowed to operate, and domestic companies will be permitted greater access to tariff-free international trading. Yuan convertibility and unrestricted foreign currency exchange may also be permitted . . . Though the usual Chinese paradoxes, contradictions, and “maybe coming someday soon” promotion strategy are all still at work.
Shanghai’s “new” free trade zone is just an expanded, invigorated, and reworked model for what they’ve already had for years, but this, apparently, makes all the difference. “New” in this case is as opposed to “old,” not new as in it’s never been done before. Shanghai’s old free trade zones have simply become it’s new one.