Saturday, Jul 22, 2017, 8:55 AM CST – China


China needs to speed up its own free trade initiative to counter the TPP

Two years after the scheme’s establishment, progress made in the free trade zones has been limited.

On October 5, it was announced that 12 countries, led by the US, had completed negotiations on the Trans-Pacific Partnership (TPP), with all parties agreeing to the conditions of the pact, which include the free flow of personnel and capital, protection of intellectual property rights, and improvement in the business environment. The agreement also impacts previously untouched areas, including labor and environmental protection, and restrictions on preferential policies for state-owned enterprises. The progress made on the TPP, which some have dubbed an “economic NATO” that will serve to undermine Chinese influence in international trade, has caused alarm within China.

To counter the potential influence of the TPP, China has been pushing for the development of bilateral free-trade pacts with several countries, including South Korea, Australia, Singapore and New Zealand, all of which are now signatories to the TPP. Besides these countermeasures, China has also launched its “free trade zone” (FTZ) initiative, a scheme which began in 2013. Establishing its first FTZ in Shanghai (the SFTZ), the central government approved the establishment of another 12 free trade zones last year.

Different from earlier projects such as the Special Economic Zones, where the government provides favorable trade policies, the SFTZ is designed to follow the model of free ports such as Hong Kong and Singapore by adopting an entirely different governance structure, including the enforcement of financial, taxation and administrative policies. The purpose of the initiative is to help Chinese leaders better understand the possible economic and social ramifications of adopting the rules enacted by the TPP, so that China can either adopt these rules – even going so far as to join the TPP if experimentation proves such a move to be in China’s interests – or take measures to minimize the new pact’s impact on Chinese trade.

However, two years after the scheme’s establishment, progress made in the free trade zones has been limited. Fiscal reform is a case in point – the SFTZ was originally designed to adopt a liberal financial policy to minimize government regulation. In fact, concerns over financial instability have delayed the enaction of these reforms. Similarly, tax reform in the SFTZ has also stagnated, largely resulting from objections raised by local governments loath to lose revenue. Finally, the goal of establishment of a modern governance system in the FTZs still seems a long way off, as there appear to be significant conflicts of interest among various government departments and agencies with a stake in such reform.

As major progress has been made in the TPP, the Chinese government must step up its efforts in pushing forward its FTZ initiative. As the initiative serves as a kind of “stress test” for the impact of the TPP on China, prolonged delay in implementing reforms will cause China to miss its window of opportunity to gain firsthand experience in this field.

As international competition over the establishment of trade regimes has become strategic, China must become more audacious in launching its policy experiments. This is not only a matter of whether China can remain competitive in international trade negotiations. It will also be key in determining whether China can deliver its reform agenda and create new momentum in its long-term economic growth. 


Editor's Picks

Sex for Snacks

In cities like Shanghai and Chongqing, a handful of high school…[More]

Worked to Death

A growing number of young Chinese white-collar employees are dying of…[More]


How Communism’s most controversial theorist finally found an audience – in…[More]

What do Chinese People Want?

“I wish I could do what you do.”…[More]


A student of Buddhism with a keen interest in China’s…[More]

Prize Fighter

Elevated into the State-approved pantheon of great Chinese writers thanks to…[More]

Dams in Distress

In 1975, over 60 dams collapsed after a rainstorm in Zhumadian city, Henan…[More]

Pathologically Politicized

Practitioners at all levels concur that “messy” is the word that…[More]


China’s indigenous honey bee is under threat from both environmental…[More]

Exam Boot Camp

A middle school in Anhui province has earned a reputation for…[More]

The New Class

China’s growing online education market has attracted the attention of…[More]

From Stall to Mall

Taobao’s shift towards a business-to-consumer model has come at a…[More]

In Whose Court?

The failure of the country’s administrative litigation system has prompted…[More]

Tradition on Trial

After Confucianism made the maintenance of inequality between the sexes fundamental…[More]

Inevitable Brutality

The vicious murder of a doctor in a Zhejiang hospital shows…[More]

Progress or Pornography?

A new sex education primer aimed at elementary school-age children has…[More]

Graft Breeds Graft

The gap between the investigation and prosecution of official corruption cases…[More]

Saving Nature

The concept of animal welfare is yet to be widely acknowledged…[More]

Problem Solved?

Former Politburo member Bo Xilai’s public trial sends mixed messages…[More]


A 74-year-old man surnamed Xie from Shenyang, Liaoning Province was duped out of 420,000 yuan (US$69,342), despite bank employees’ efforts to…[More]

An Avoidable Tragedy

Poor city planning and lax safety regulations turned a minor gas…[More]


A policeman pulled his gun to dissuade villagers from stealing oranges…[More]

Who Cares?

A new law decrees that all Chinese citizens are now obliged…[More]

Mean Streets

The chengguan system has become the most visible symptom of a…[More]

How do Chinese people live?

So, the bottom line is that Beijing is an expensive place.…[More]

Back in Action

After stagnating for 10 years, China’s SOE reform has fired up…[More]


The hanging coffins of the Bo people, a Chinese ethnic minority…[More]


Wang Xun, an archeologist with Peking University, arranged the bones of…[More]

Trust Trip

Embarking on a three-month car journey around China without handing over…[More]

Fading Lights

For those who grew up under the bright lights of China…[More]