Guangdong Free Trade Zone Likely to Win Approval

A free-trade zone (FTZ) encompassing Guangdong province, Hong Kong and Macau is likely to get an informal go-ahead from the central government, according to a piece in the state-run business news site China Economic Net.

This indication that the central government is likely to greenlight applications being submitted by local and regional governments to establish their own free trade zones comes just one and a half months after the official launch of the 29-sq-km (11.3 sq-mi) Shanghai FTZ officially launched on September 29. But the article cautioned that each FTZ will likely be given its own unique set of advantageous policies.

Guangdong is is seeking approval to become the second FTZ pilot program. As the most trade-oriented of China’s provinces it already hosts the Shenzhen Qianhai Economic Zone which had been approved by the State Council in 2010 with 22 preferential policies pertaining to financial services and foreign investment. Three years later SQEZ has mostly languished on the drawing board, however, due to lack of any clear signal that companies investing in the zone would not be shackled by China’s stringent and multifariously overlapping financial regulations.

The launch of the Shanghai FTZ and the release by the Central Committee last week of its 60-point liberalization plan has infused Guangdong with the hope of using Qianhai as the starting point for a large FTZ that would include the special administrative regions of Hong Kong and Macau which currently operate under their own respective quasi-autonomous governments.

“On the basis of pushing forward development of the existing pilot FTZ, qualified regions will be selected to build free trade zones or ports,” reads part of a major policy statement released Friday by the Communist Party affirming the importance of the Shanghai pilot FTZ.

The statement is is seen as clear direction from the ruling Communist Party to foster more FTZs as a way to facilitate far-reaching economic reforms. The statement had been endorsed during the four-day Third Plenary Session of the 18th CPC Central Committee which ended last Tuesday.

In the seven weeks since its launch the Shanghai FTZ has lifted China’s stock markets by raising the expectation that the liberalization of the financial and services sector will stimulate both consumer spending and an influx of foreign capital. The approval of additional FTZs are likely to reinforce those expectations.