China FTZs: S'pore expertise wanted

China FTZs: S'pore expertise wanted

In a bid to lift growth, China has announced a new batch of free trade zones (FTZs), and it wants Singapore's help to develop them.

The Chinese Ministry of Commerce on Aug 31 unveiled a list of seven new FTZs in the provinces of Liaoning, Zhejiang, Henan, Hubei, Sichuan and Shaanxi as well as Chongqing city, ahead of the Group of 20 summit this week.

This is seen by observers as China signalling to the world its resolve to push forward with reforms and opening up, against a global trend of rising protectionism.

And Singapore could play a useful role in these newly established FTZs, Chinese President Xi Jinping suggested to Prime Minister Lee Hsien Loong during their meeting in Hangzhou last week.

The first FTZ was set up in 2013 in Shanghai to test economic reforms such as more relaxed rules towards foreign investment. Three more were set up in 2014 in Fujian and Guangdong provinces, as well as Tianjin city.

The FTZs are different from the old free trade areas or special economic zones set up in the 1980s and 1990s, said trade law expert Henry Gao from Singapore Management University.

"They are not meant for boosting exports and foreign trade," he said.

Instead, they serve to attract foreign investments and introduce administrative reforms to transform government functions from those of controls and approvals to a more service-oriented role, he said.

"Singapore's experience in attracting foreign investments and its successes in providing social services fit in nicely with the two main objectives of these FTZs," said Associate Professor Gao.

As Singapore has an open economy, it provides a good model for China in its overall economic opening-up strategy, said trade economist Sarah Tong of the East Asian Institute at the National University of Singapore.

Unlike the earlier FTZs, which are all along the eastern coast, the seven new ones include some in central and western China.

"This is more about opening up within China, and co-operation with South-east Asia (for trade and investment) is an important part of this inland opening," said Dr Tong.

Singapore could be a key partner in coordinating co-operation between China's inland regions and South-east Asia, she added.

Singapore business leader Teo Siong Seng, who has three shipping- related firms in the Shanghai FTZ, said that given Singapore's well-established trade and financial sectors, it can help give pointers on developing related industries.

While there have been criticisms of the FTZs already in place that advantages are limited, analysts said the slow progress is a reflection of the difficulties in pushing forward economic reforms following Mr Xi's 2013 announcement of an ambitious blueprint to do so.

Gone are the days of the almost- instant explosion of changes seen in special economic zones such as Shenzhen in the 1990s, Dr Tong noted. Back then, the political atmosphere was different and the system before opening up was rigid, she said. "Today, the economy is more sophisticated and the government is more cautious in rolling out financial reforms for fear of making disastrous mistakes."

Above all, differences between the local authorities running the FTZs and the central government pose the biggest challenge, said Prof Gao. "Singapore will not be able to help with this, but it can play a role on the micro-level, in specific areas such as urban management."

For example, he said, the authorities in the Fujian FTZ were interested to learn from Singapore in things such as TradeNet, an electronic platform for making Customs declarations.

With the FTZs, Singapore can continue to play an "irreplaceable role" in China's development, he said.


This article was first published on September 10, 2016.
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