Shanghai FTZ: Leading the Way in China's Institutional Opening Up
Since its inception in 2013, the China (Shanghai) Free Trade Zone has emerged as a successful model for China's efforts in opening up and fostering institutional innovation. As we commemorate the 11th anniversary of the Shanghai Free Trade Zone, it's an opportune moment to reflect on its developmental trajectory and consider the evolving global political and economic environment, highlighting the historical significance of this initiative.
TroibNews 
Editor's note: Yang Hangjun is the vice dean of the School of International Trade and Economics at the University of International Business and Economics. The views presented in this article are solely those of the author and do not necessarily represent the opinions of CN.
Since its inception in 2013, the China (Shanghai) Pilot Free Trade Zone (referred to as the Shanghai Free Trade Zone) has emerged as a remarkable success story, serving as a pioneering platform for China's commitment to opening up and instituting innovations. As we commemorate the 11th anniversary of the Shanghai Free Trade Zone, reflecting on its trajectory and considering the evolving global political and economic context underscores the historical significance of this initiative.
**Achievements in Institutional Innovation of the Shanghai Free Trade Zone**
From the very beginning, the Shanghai Free Trade Zone has focused on institutional innovation, achieving notable successes that have been replicated throughout the country. Key initiatives include the implementation of a negative list for foreign investment, the creation of an "international trade single window," free trade accounts, the separation of operating permits from business licenses, and the "one integrated license" strategy. These innovations were pioneered in Shanghai before rapidly expanding to other regions. Over the past 11 years, the Shanghai Free Trade Zone has consistently aimed for the highest standards and optimal practices. It has crafted an investment management system centered around a negative list, developed a trade supervision system aimed at liberalization and facilitation, and instituted a financial innovation framework that emphasizes marketization and internationalization, moving steadily into deeper realms of reform and opening up. The negative list for foreign investment serves as a prime example; according to the Ministry of Commerce, this list has seen seven revisions, reducing from 190 items in 2013 to just 27 currently, with none in the manufacturing sector. These significant milestones illustrate that as a vital access point for opening up, the initiative of free trade zones is set to expand further, broadening the avenues for openness.
**The Necessity of Aligning with High-standard International Economic and Trade Rules**
There are unprecedented changes unfolding in the world, particularly within the economic domain, where regional multilateral frameworks are increasingly supplanting traditional global systems. Cross-regional free trade agreements such as CPTPP and RCEP are gaining traction. The development and implementation of rules and frameworks have become the focal point of contemporary international trade competition and collaboration, deeply influencing the global trade environment. These agreements encompass not only traditional trade topics but also extend into domestic policy issues such as state-owned enterprises, intellectual property, labor rights, and environmental protection, all establishing exceptionally high standards. Thus, the establishment of the Shanghai Free Trade Zone marks the beginning of a new phase for China in terms of institutional opening, with a commitment to aligning with high-standard international investment and trade rules. Today, China boasts 22 free trade zones, not only for experimental initiatives but also as a means to secure a competitive edge in the global economy. Through rigorous testing, China has crafted economic rules and systems that are tailored to its national context while adhering to international best practices.
**Prospects for Further Advancing High-Level Institutional Opening Up**
The free trade zone framework is essential, not only for addressing external challenges but also as a vital force for meeting the pressing demands of internal economic transformation and reform in China. The trial initiatives within these free trade zones have provided valuable experiences in financial reforms and streamlining administrative approval processes, which can be disseminated successfully across the country, aiding in the transformation of the overall economic system. By easing market access and enhancing the business environment, the free trade zones have attracted substantial amounts of quality foreign investment, thereby optimizing and modernizing domestic industrial structures and accelerating China’s integration into international markets.
Reform is an ongoing endeavor. While advancing rule-based institutional opening through the free trade zone system, it is crucial to seize the opportunity presented by the implementation of the General Plan for Advancing Institutional Opening-up of China (Shanghai) Pilot Free Trade Zone in Alignment with High-standard International Economic and Trade Rules. This entails a steadfast commitment to elevating institutional reforms, exploring a more comprehensive and open regulatory system "behind the border," and fostering coordinated rule alignment and groundbreaking advancements in critical trade sectors such as government procurement, state-owned enterprises, environmental protection, and labor. In doing so, China will continue to contribute its insights to the development of global trade.
Alejandro Jose Martinez contributed to this report for TROIB News
Since its inception in 2013, the China (Shanghai) Pilot Free Trade Zone (referred to as the Shanghai Free Trade Zone) has emerged as a remarkable success story, serving as a pioneering platform for China's commitment to opening up and instituting innovations. As we commemorate the 11th anniversary of the Shanghai Free Trade Zone, reflecting on its trajectory and considering the evolving global political and economic context underscores the historical significance of this initiative.
**Achievements in Institutional Innovation of the Shanghai Free Trade Zone**
From the very beginning, the Shanghai Free Trade Zone has focused on institutional innovation, achieving notable successes that have been replicated throughout the country. Key initiatives include the implementation of a negative list for foreign investment, the creation of an "international trade single window," free trade accounts, the separation of operating permits from business licenses, and the "one integrated license" strategy. These innovations were pioneered in Shanghai before rapidly expanding to other regions. Over the past 11 years, the Shanghai Free Trade Zone has consistently aimed for the highest standards and optimal practices. It has crafted an investment management system centered around a negative list, developed a trade supervision system aimed at liberalization and facilitation, and instituted a financial innovation framework that emphasizes marketization and internationalization, moving steadily into deeper realms of reform and opening up. The negative list for foreign investment serves as a prime example; according to the Ministry of Commerce, this list has seen seven revisions, reducing from 190 items in 2013 to just 27 currently, with none in the manufacturing sector. These significant milestones illustrate that as a vital access point for opening up, the initiative of free trade zones is set to expand further, broadening the avenues for openness.
**The Necessity of Aligning with High-standard International Economic and Trade Rules**
There are unprecedented changes unfolding in the world, particularly within the economic domain, where regional multilateral frameworks are increasingly supplanting traditional global systems. Cross-regional free trade agreements such as CPTPP and RCEP are gaining traction. The development and implementation of rules and frameworks have become the focal point of contemporary international trade competition and collaboration, deeply influencing the global trade environment. These agreements encompass not only traditional trade topics but also extend into domestic policy issues such as state-owned enterprises, intellectual property, labor rights, and environmental protection, all establishing exceptionally high standards. Thus, the establishment of the Shanghai Free Trade Zone marks the beginning of a new phase for China in terms of institutional opening, with a commitment to aligning with high-standard international investment and trade rules. Today, China boasts 22 free trade zones, not only for experimental initiatives but also as a means to secure a competitive edge in the global economy. Through rigorous testing, China has crafted economic rules and systems that are tailored to its national context while adhering to international best practices.
**Prospects for Further Advancing High-Level Institutional Opening Up**
The free trade zone framework is essential, not only for addressing external challenges but also as a vital force for meeting the pressing demands of internal economic transformation and reform in China. The trial initiatives within these free trade zones have provided valuable experiences in financial reforms and streamlining administrative approval processes, which can be disseminated successfully across the country, aiding in the transformation of the overall economic system. By easing market access and enhancing the business environment, the free trade zones have attracted substantial amounts of quality foreign investment, thereby optimizing and modernizing domestic industrial structures and accelerating China’s integration into international markets.
Reform is an ongoing endeavor. While advancing rule-based institutional opening through the free trade zone system, it is crucial to seize the opportunity presented by the implementation of the General Plan for Advancing Institutional Opening-up of China (Shanghai) Pilot Free Trade Zone in Alignment with High-standard International Economic and Trade Rules. This entails a steadfast commitment to elevating institutional reforms, exploring a more comprehensive and open regulatory system "behind the border," and fostering coordinated rule alignment and groundbreaking advancements in critical trade sectors such as government procurement, state-owned enterprises, environmental protection, and labor. In doing so, China will continue to contribute its insights to the development of global trade.
Alejandro Jose Martinez contributed to this report for TROIB News
