Dozen more China FTZs a waste of effort
The absence of common sense in the recent decision to create a host of special economic zones around the mainland is a sure sign politics is involved.
China will have 12 free trade zones, Beijing announced a couple of weeks ago. Interesting, considering that Shanghai can’t even explain exactly what its own highly publicised free trade zone will be doing. So far it is all hot air and hyperbole and officials are running out of descriptions for what is being billed as an incredible game changing zone that will catapult the city to the forefront of everything.
As far as we can see, the only incredible thing about Shanghai’s FTZ is that months after the launch there is still a complete lack of details about how it will actually work.
Yet even as business leaders scratch their heads over the Shanghai zone, along comes an announcement by Beijing that it will create another 12 special economic areas around the country.
The location of only two of the FTZs were named – Guangdong and Tianjin – but local media reported that other cities approved were Zhoushan, Hangzhou, Qingdao, Chengdu and Wuhan.
Politics is never far from major economic or infrastructure announcements, and that is the case here. Local commentators report that as soon as the Shanghai zone hit the headlines, Guangdong and Tianjin officials began aggressively lobbying for the establishment of FTZ in their cities. A bunch of other cities then followed, pushing and shoving their way to the front like shoppers heading for the Hermes store in Hong Kong.
So we now have 12 pilot free trade zones. The question is, will they all be viable? The answer, of course, is no they will not.
Since Shenzhen’s special economic zone opened in 1980 only four other such zones have been set up – Xiamen, Shantou, Zhuhai and Hainan Island. That is four special zones in 34 years, none of which are especially special, and now they want 12 more?
Beijing has traditionally taken a cautious approach, introducing one special economic zone at a time and slowly building it up before launching the next one, so commentators here are surprised that so many pilot schemes are on the cards.
There is no way so many FTZ’s can survive on their own, and soon they will all be clamouring for government support and assistance and investment.
China probably needs four main economic zones: In the south around Hong Kong and Shenzhen, in Shanghai to cover the east, Tianjin the most likely spot in the north, and probably Chongqing or Chengdu in the centre of the country.
From a global trade point of view, that may be the most sensible approach to the creation of special economic zones – limited in number, expansive in scale.
Unfortunately there are powerful political interests in play, and no matter what the country or how important the issue is, when politics walks into a room, common sense always walks out.