Aerial photo shows the Yangpu international container port at Yangpu economic development zone in South China's Hainan province, June 19, 2023.
China is taking steps to align itself with high-standard international economic and trade rules by promoting the institutional opening up of qualified free trade zones (FTZs) and a free trade port (FTP).
The country has recently introduced new measures to deepen reforms on a trial basis in FTZs located in Beijing, Shanghai, Guangdong, Tianjin, Fujian and other eligible free trade pilot zones, as well as the Hainan Free Trade Port.
These measures, outlined in a document on opening up, focus on several key areas including promoting innovative development in goods trade, facilitating trade in services, streamlining temporary entry of business personnel, and ensuring the healthy growth of digital trade.
"China's new policy measures concerning free trade areas provide practical support for its participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA)," said Chen Chunjiang, assistant minister at China's ministry of commerce.
The trials will help China to accumulate experience and also demonstrate its willingness and ability to join high-standard economic trade agreements, Chen said.
Further opening up of FTZs
According to the new measures, foreign financial institutions operating in the pilot free trade areas will be permitted to offer certain financial services that already allowed for their Chinese counterparts.
The regulatory authorities in the financial sector will have a maximum of 120 days to decide on applications from foreign financial institutions for launching these services. However, they can withhold permission if there are valid prudential reasons and must inform the applicants promptly.
Domestic and foreign investors will be treated as equals while rolling out new financial services in the pilot areas, to ensure a level-playing field for foreign businesses, said Wang Xin, director of the research bureau at the People's Bank of China, the country's central bank.
These efforts aim to create a fairer and opener environment for both domestic and foreign financial services providers. They will enhance the convenience of cross-border investment for foreign investors and expand investment channels for enterprises and individuals in the pilot areas, Wang said.
An aerial photo shows the Tesla Gigafactory in Lingang new area of the China (Shanghai) Pilot Free Trade Zone in east China's Shanghai, August 20, 2022. /Xinhua
Measures will also be implemented to bolster trade in goods. These measures include pilot projects for importing remanufactured products in key industries, duty exemption for aircraft and vessels after being repaired in the Hainan Free Trade Port, and temporary tariff and tax waivers for specific imported goods.
For senior managers intending to establish branches or subsidiaries in the pilot areas, their temporary stay validity will be extended to two years, and their spouses and family members will enjoy the same duration of stay.
This will provide greater convenience to executives employed by foreign enterprises, as well as their spouses and family members, who come to China to explore investment opportunities or establish subsidiaries.
Experts say that these steps will help foster a more enabling environment for both domestic and foreign businesses, broaden market access and reduce barriers in service trade.
"Institutional opening up refers to the process of opening up based on a system of rule, and aligning with high-standard international economic and trade rules is a crucial approach to foster institutional opening up," said Liu Bin, professor at the China Institute for WTO Studies of the University of International Business and Economics in Beijing.
"These measures concerning free trade areas is of great significance for better utilization of foreign investment. In terms of capital utilization, the measures fully leverage two markets and two types of resources, reduce financing constraints, and address financing difficulties faced by enterprises," said Liu.
This aerial photo shows the Haikou International Duty-Free Shopping Complex in Haikou, south China's Hainan Province, April 4, 2023. /Xinhua
On the path of high-quality opening up
China has been advancing institutional opening up and has expressed its support for a regional free trade agreement that fosters economic globalization and regional economic integration, as stated by the Ministry of Commerce.
In line with its dedication to global trade liberalization, China submitted its application to join the CPTPP in September 2021. In the same year, it applied to join the DEPA, which currently includes Chile, New Zealand, and Singapore. DEPA builds upon existing free-trade agreements, such as CPTPP, by incorporating additional commitments to foster digital trade and cooperation.
China has already implemented pilot projects and conducted experiments in selected pilot FTZs and the Hainan FTP, following the rules, standards, and management obligations of the CPTPP.
For instance, the Hainan free trade port serves as an exemplary case. Proposed in 2018 and commencing construction in 2020, it has witnessed the implementation of over 180 policies and measures aimed at tariff exemptions, trade and investment facilitation.
As of January this year, Hainan had exempted nearly 3 billion yuan (about $435.7 million) in import duties for goods subject to zero tariffs, as well as for processing trade.