China is currently considering new regional free trade zones (FTZs) based on the launch of the Shanghai FTZ. As reported by the Shanghai Securities News, which is a Shanghai-based news agency subordinated to Xinhua News Agency, a proposal to build a regional FTZ incorporating Guangdong, Hong Kong and Macao, the three key areas of the Pearl River Delta (PRD), was submitted to China’s State Council for approval in mid-December of this year.

According to Shanghai Securities News, the PRD FTZ will use the overall design and structure of the current Shanghai FTZ as a reference point, while further proposing creative mechanisms and measures. For example, in terms of the “negative list” of industry entry, the PRD FTZ will be more innovative and liberalized compared to the Shanghai FTZ. It will mainly focus on manufacturing, logistics, international trade, maintenance, research and development and international trade settlement.

According to the report, it is proposed that the PRD FTZ will cover the Nansha Development Zone of Guangzhou, Qianhai New Area of Shenzhen (connected with Hong Kong), Hengqin New Area of Zhuhai (connected with Macao), and possibly the comprehensive bonded zone of Baiyun International Airport of Guangzhou. The total acreage is 931.385 square kilometers, much larger than the 28.78 square kilometers of the Shanghai FTZ.

In fact, the PRD FTZ plan is just one of China’s regional FTZ plans currently under consideration. The provincial government of Shandong stated that they have also recently submitted an application for the approval of a Qingdao FTZ to the State Council.

Southern Weekend, a news agency in China, reported that there have been 13 regions of China showing interest in building regional FTZs since the Shanghai FTZ launched in September, and at least four of them have submitted applications to the State Council or other relevant government departments, including Guangdong, Tianjin, Qingdao and the Liangjiang New Area of Chongqing. According to Southern Urban Daily, an affiliated news agency of Southern Weekend, there may even be a batch of FTZs receiving approval next year.

Regional FTZs are different from free trade agreements signed by China with other countries. A spokesman of China’s Ministry of Commerce (MOFCOM), Yao Jian, introduced during a press conference in early December that there are two types of FTZs – FTZs with other countries or territories (such as the China-ASEAN FTZ) and regional FTZs in China (such as the Shanghai FTZ).

He further explained that the objective of FTZs with other countries or territories is to encourage regional economic integration and trade facilitation based on a multilateral agreement. While the Shanghai FTZ also provides more convenience for trade, it is a pilot project initiated for China’s further reform and openness. The ultimate goal of the Shanghai FTZ is to experiment with the feasibility of internationally accepted rules in China and therefore attract more investment into the zone.

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