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City seeks to build western free trade zone
CHENGDU, a reform pioneer among western cities in China, has submitted an application to the Ministry of Commerce to create a free trade zone like the pilot one authorized in Shanghai last year.
“Such trials are important to accelerate China’s campaign of faster development in interior areas,” said Xie Kaihua, director of the commerce commission in Sichuan Province.
“Chengdu is an outstanding candidate due to its geographical, economic and cultural advantages.”
In as early as last July, two months before the unveiling of the China (Shanghai) Pilot Free Trade Zone, Chengdu completed work on a draft plan for the trade zone.
Chengdu officials said the ministry regarded its draft plan as “very hopeful.”
Last September, the Shanghai pilot free trade zone was established to serve as a testing ground for further deregulation of the nation’s financial services. A string of reforms has been announced, including freeing up interest rates, expanding cross-border use of the yuan and promoting yuan convertibility under the capital account.
Free trade zones in general are areas where goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of customs authorities. But China is now experimenting with free trade zones that go beyond traditional boundaries and become incubators for trying out new ideas.
Chengdu officials said their proposed zone has three main talking points.
Focus One: differentiated strength
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.
“Chengdu’s free trade zone would be an upgrade to the city’s existing technology bonded area,” a government document said. “It will focus on close ties with European countries, with transport hub services and with institutions providing financial support to technology manufacturing.”
Focus Two: development of western China
With Shanghai locking up the eastern coast in terms of pioneering free trade zones, Chengdu’s plan offers the opportunity to extend that innovation to western areas of the country that the central government wants to see grow.
That gives Chengdu, as a hub of western development, an advantage.
“The free trade zone would free up trade duties, foreign exchange, interest rate movements and investment flows,” according to the city’s document. “It will greatly accelerate foreign investment, and hasten the process of manufacturing and services companies coming to Chengdu.”
It will also help transform the city into a western center for trade.
Focus Three: connecting to the world
The establishment of a free trade zone would be another step in China’s economic development since the country joined the World Trade Organization in 2001. It would help Chengdu connect with the world, and focus overseas attention on western areas of the country that badly need financing to upgrade their economies.
It would also help local manufacturers retool to more modern methods, assist the government in providing better services and lift Chengdu to more international status.
Chengdu’s trump cards
Indeed, Chengdu holds quite a few trump cards in its quest to become one of the first cities to follow the Shanghai’s footsteps.
First, the city has a long history of trading with European countries. Its existing freight rail link with Eastern Europe dovetails nicely with China’s new plans to create corridors of new trade through central Asia to Europe along the old Silk Road.
Second, it has 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. It has already attracted likes of Hewlett-Packard and Dell. To date, 252 Fortune 500 companies have settled in Chengdu.
Fifth, it also 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 as capital of Sichuan Province has stood at the forefront of the campaign.
The city opened China’s first municipal Bureau of Exposition, with a staff dedicated to promoting the convention and exhibition industry. It is China’s first model city in protecting intellectual property and the first to set up a government award system to encourage patent registration. It has been a pioneer in streamlining business approvals, was among the first cities to operate 4G telecom services, and was chosen the friendliest city in China for foreign investment by Fortune magazine.
Last year, Chengdu hosted the Fortune Global Forum and the World Chinese Entrepreneurs Convention.
“To push forward, we must initiate reforms ourselves,” said Xie Kaihua, director of Sichuan Commerce Commission. “We think this free trade zone proposal fits into that thinking.”
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