Pilot free trade zones drive China’s high-quality opening up
In the Hefei area of Pilot Free Trade Zone (FTZ) in east China’s Anhui Province, the plant construction of Volkswagen Anhui MEB (Modular Electric Drive Matrix) is in full swing, with mass production of electric vehicles planned for 2023.
A few kilometers away from the MEB plant, Dazhong College, which was jointly built by Volkswagen Group China, Volkswagen Anhui and Hefei University, has started operations in the FTZ pilot plant. Inspired by the German vocational training system, the college aims to develop more qualified talent that meets the needs of companies.
Founded in 2017 in the provincial capital of Hefei, Volkswagen Anhui focuses on the research, development and manufacture of New Energy Vehicles (NEVs) to capture the world’s largest NEV market.
“The pilot FTZ has not only provided many practical services and support for our projects, but also made the daily life of foreign employees in the zone easier and boosted the confidence of foreign companies,” said Ronny Büchner, head of government relations at Volkswagen Anhui.
Last month marked the second anniversary of the inauguration of the pilot FTZ in Anhui. In the first half of this year, it generated foreign trade of 95.93 billion yuan (about 13.38 billion U.S. dollars), up 28.5 percent year on year, according to the Administration Bureau of the Pilot Free Trade Zone of China ( Anhui).
Pilot free trade zones serve as “test beds” for China to push ahead with reform and opening-up. In 2013, China’s first FTZ pilot project was launched in Shanghai. In less than 10 years, the number of such zones has grown to 21, located in both coastal economic hubs such as Guangdong and Zhejiang and inland regions such as Sichuan and Shaanxi.
The pilot FTZ in Shanghai is now home to automaker Tesla’s first gigafactory outside the United States, construction of which began in January 2019. In mid-August, the Gigafactory reached a new milestone with its 1 millionth vehicle produced.
The rapid expansion of FTZ pilot projects shows China’s firm determination to open up further development opportunities and share them with the rest of the world.
FACILITATION OF TRADE, INVESTMENTS
A cargo ship loaded with rubber arrived at Wuhu Port in Anhui’s pilot FTZ. According to the newly introduced “Shipside Delivery” mode, the pre-cleared containers were unloaded directly into vehicles and transported out of the port.
“In the past, goods would go to the storage yard first, and we had to go through a series of procedures to pick them up, which usually takes over a day,” said Zhang Changgen, a logistics supplier for a local auto parts maker.
Thanks to the new mode, a container can now be picked up within half an hour after arrival, greatly reducing logistics time and fees, Zhang said.
“The pilot free trade zones attract international talent, technology and companies, but also provide a platform to test new business forms and models,” said Chen Shiyi, director of the China (Anhui) Pilot Free Trade Zone Institute.
Based on regional advantages, pilot free trade zones across China have been exploring new ways to improve the business environment and deepen opening-up.
The Pilot Free Trade Zone in south China’s Guangxi Zhuang Autonomous Region has established a major cross-border e-commerce logistics channel for the Association of Southeast Asian Nations (ASEAN) and launched 10 air routes to countries such as Indonesia, Thailand and Malaysia, according to the regional economic department.
The continuous shortening of the negative lists in pilot free trade zones has allowed foreign investments broader market access. Since the launch of the first pilot FTZ foreign investment negative list in 2013, the number of items on the list has been reduced from 190 to 27 in 2021 after seven rounds of amendments, Vice Commerce Minister Wang Shouwen said in March.
On the same occasion, the vice minister praised the active role of these zones in promoting the stability of China’s foreign trade and investment. In 2021, the actual use of foreign capital of the 21 pilot FTZs increased by 19 percent, 4.1 percentage points higher than the national level, he noted.
Meanwhile, the total import and export volume of 21 FTZ pilot projects reached 6.8 trillion yuan last year, accounting for 17.3 percent of China’s total import and export volume, according to the ministry.
PROMOTING FINANCIAL INNOVATIONS
Because of their significant role in promoting high-level opening-up, pilot free trade zones have become China’s new hotbed of financial innovation and reform.
The pilot FTZ in Shanghai took the lead in launching a series of financial innovation measures, including the expansion of cross-border use of RMB and the establishment of a free trade account system. The system has been rolled out in pilot free trade zones in Tianjin Municipality, Guangdong Province and other regions in China.
Over the past three years, more than 400 financial companies have settled in the Lingang new area of the pilot FTZ in Shanghai, with an industrial investment fund system valued at 283 billion yuan.
Earlier this year, the first foreign banks established their presence in the region, including United Overseas Bank (China) Limited (UOB China). The bank has actively worked with its partners to develop innovative solutions in areas such as cross-border cash management, offshore trading, foreign fund investment and sustainable finance, said Peter Foo, President and CEO of UOB China.
“The financial opening reflects China’s deeper opening up on a larger scale and broader spectrum. We must use the pioneering role of FTZ pilot projects to strengthen systematic reforms and promote the internationalization level of financial services,” said Zheng Yi, a researcher at the China (Anhui) Pilot Free Trade Zone Institute.