EconFact 3/28 – “Free” Trade Zones

The other big story in the Emerging Market (EM) world aside from the conflict in Ukraine/Russian conflict is the changing nature of the Chinese economy. The 2013 3rd Plenum, a meeting of Communist Party’s Central Committee, seemed to suggest a more market-driven philosophy to guiding China’s economy moving forward having massive consequences for China going forward.

This week, I’ll be focusing on China.

Trying Capitalism 

In the expanse of Shanghai, a bastion of capitalism lives not. No, not the American embassy but an Free Trade Zone (FTZ) – a 29 km^2 (11 miles^2 for you heathens) area set up in September 2013 where corporations can conduct business and not be under the normal regulations that the Chinese Central Government usually enforces.

The zone is viewed as a testing ground for greater financial liberalization as the country adopts a more market-friendly approach to its economy.

This ranges from interest-rate liberalization, or banks can pay whatever interest rate they want for deposits (capped at $500,000), zero-tariff policy on imports/exports, allowing the sale of video game consoles (!) which were banned in China since 2000, as well as tax-exempt status for businesses for 10 years.

There are a couple of places in China where “Special Economic Zones” exist (the most well known in Shenzhen) but Free-Trade Zone in Shanghai is especially remarkable because it is seen as a model to be replicated throughout China and really is a “testing ground” for future reforms.

Read More:

China Briefing’s excellent summary of the features of Shanghai’s FTZ


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