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Chengdu pushes hard for China’s second FTZ
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CHENGDU, capital city of China’s southwestern Sichuan Province, has tested the waters for the creation of a free trade zone through running some trials that have been proven effective in Shanghai.
The effort has put the city ahead of other candidates that have applied to establish free trade zones like the pilot one in Shanghai.
“We have learned about Shanghai’s experience and chosen those that fit into the needs of Chengdu to energize the city’s growth,” Chengdu government officials told a conference held in August.
While Shanghai was celebrating the first anniversary of the establishment of the China (Shanghai) Pilot Free Trade Zone last month, Chengdu had started replicating selected policies that did not contradict existing laws or rules. The provincial government of Sichuan has allocated 8.77 square kilometers, covering the Chengdu High-Tech Comprehensive Bonded Zone and the Chengdu Airport Bonded Logistics Zone, as the test ground for the new policies.
“These areas represent our FTZ-to-be,” officials said. “Based on the experience of Shanghai, we have sorted out 17 missions in four main aspects to upgrade our bonded areas in function and to improve our works.”
Four main aspects in works
The four aspects are the construction of a more transparent investment management system, a more convenient trade operation system, a mechanism to incubate stronger innovation and a better ex-post supervision system.
The efforts are expected to bear fruit within a year after a detailed plan was approved by the authorities in August. Officials are starting to implement the planned policies now. Chengdu expects to have conducted an evaluation on the trial’s results by August next year.
“Chengdu is very open-minded,” said Shi Lei, an economics professor at Fudan University. “The city is a quick learner, an active doer, and has an innovative spirit that makes it never shy away from hurdles or impediments.”
Many of the 17 missions under the plan are associated with Chengdu Customs. According to media reports, right after Shanghai’s pilot free trade zone started operation last year, Chengdu Customs officials consulted their peers in Shanghai to conceive what could be learned and copied.
Among the 14 policy innovations conducted in Shanghai Customs, Chengdu has replicated eight, including allowing companies to transport goods in their own registered vehicles, allowing one declaration for multi-batches of goods, and streamlining the verification process for processed goods in trade.
Such trials have already bred benefits for companies that have operations in Chengdu. Foreign firms like Intel can reportedly save 1.2 million yuan (US$194,000) in logistics in a year under the new policy.
Statistics show that trade in the Chengdu High-tech Comprehensive Bonded Zone rose 23 percent on an annual basis in the first half of this year to US$14.9 billion as a result of the new trials.
“We have applied to the General Administration of Customs to copy all the 14 policy innovations initiated in Shanghai,” Chengdu officials said.
Zone to zero in on technology
Chengdu was among the first batch of cities that submitted an application to the Ministry of Commerce to create a free trade zone like the pilot one in Shanghai. With Shanghai locking up the eastern coast in terms of pioneering free trade zones, Chengdu plans to offer the opportunity to extend that innovation to western areas of the country that the central government wants to see grow.
Unlike the experimental zone in Shanghai that focuses on the services and financial sectors, Chengdu wants to create a zone concentrating on technology, drawing on its research and development capabilities, its educated labor force, and its manufacturing base.
The establishment of a free trade zone would be another step for Chengdu to connect with the world and focus overseas attention on western areas of China that badly need financing to upgrade their economies.
Chengdu holds quite a few trump cards compared to other FTZ candidates such as Tianjin, Xiamen and Guangzhou, in its quest to become one of the first cities to follow Shanghai’s footsteps.
First, the city has a long history of trading with European countries. Its existing freight rail link with Eastern Europe dovetails with China’s new plans to create corridors of new trade through central Asia to Europe along the old Silk Road.
Second, it has a good relationship with Southeast Asian countries, including a technology park under construction in partnership with Singapore.
Third, Chengdu is a transport hub, home to the busiest airports and bus stations in China’s western areas.
Fourth, the city is already acknowledged as a strong center for technology development in China, attracting the likes of Lenovo, Dell, Hewlett-Packard, Toyota and Volkswagen. To data, 255 of the Fortune 500 global companies have targeted the city for investment.
Fifth, it has a strong financial base, with many major global banks operating branches in the city.
Ever since China’s central government started promoting its “Go West” policy in early 1990s, Chengdu has stood at the forefront of the campaign. Last year, Chengdu hosted the Fortune Global Forum and the World Chinese Entrepreneurs Convention, which left many global business leaders marveling at the city’s rapid growth.
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