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Forum Successfully Held on What China (Shanghai) Pilot Free Trade Zone Could Bring to China
Time:2013-10-25     Click:

On September 28th, 2013, more than 700 people including professionals, experts, scholars, alumni and students participated in the Autumn Forum (Finance in China, voice from Fudan) of China Financiers Club at Fudan University. The forum addressing what China (shanghai) Pilot Free Trade Zone could bring to China was co-organized by the China Financiers’ Club at Fudan University and the School of Economics and supported by the Alumni Association of the university. Elites from various fields came to discuss in-depth what profound impact the zone will have.

     

Professor Lin Shangli, vice president of Fudan University, and Jin Yu, president of the Bank of Shanghai made opening speeches. First of all, Prof. Lin introduced guests present at the forum and extended a warm welcome to the audience. He pointed out that the China Financiers Club, the concentration of wisdom and enthusiasm of Fudan alumni, aims at promoting development of China’s financial sector with expertise and a global outlook. Mr Jin thought highly of the precise timing and explicit function of the forum. He said that the free-trade zone, which had gained world-wide attention, is very much likely to play a leading role in the all-round transformation of China’s economy in terms of fostering new advantages in global competition, a new platform for cooperation and development, new areas for economic growth and the upgrading of China’s economy.

     

New trend of globalization and mission of the free-trade zone

The first half of the forum began with a keynote speech by Prof. Zhou Hanmin, vice-chairman of the CPPCC in Shanghai, on the “Mission of the Free-trade Zone.” It was followed by the speech entitled “The New Trend of Globalization and Construction of the Free-trade Zone” by Professor Yuan Zhigang, dean of the School of Economics.

     

Zhou Hanmin: Mission of the Free-trade Zone

Professor Zhou began with a quote from the Book of Poetry. “Although Zhou was an ancient state, it had a reform mission.” Professor Zhou believed that the mission of the free-trade zone is to promote deeper reform through wider opening up. The history of 35 years of reform and opening up has been the promotion of reform through opening up. The establishment of the free-trade zone is the fourth wave since the initiative of the reform and opening up, following the establishment of the five special economic zones and 14 open coastal cities, the development of the Pudong District and China’s accession to the WTO. Shanghai has been a forerunner amid each and every wave of reform. But we should be aware that, compared with previous reforms with longer time spans, this time the first phase of the Free-trade Zone is only 3 years.

     

Breakthrough in reform, negotiation and policy making

Professor Zhou pinpointed three things to be achieved within three years, namely, capability of being replicating, popularized and upgraded. That is, more attention should be paid to breakthroughs in the course of reform, negotiation and policy making. First, as China has entered the realm of middle income countries, a new round of reform and opening up calls for a master plan from the central government. The free-trade zone should play a leading role in increasing innovation by Chinese firms and function as a window through which China’s further opening up and the world’s further reform can be seen. He made an appeal for attention to three ongoing international negotiations, the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership and the Public Service Announcement. These ongoing negotiations are about the new rules governing the world’s economy, trade and investment dominated by the US. There is pressure for reform from both home and abroad. The third breakthrough concerns policy making. Though the free-trade zone is new to China, it has been a common practice in the world. The overall plan and basic principles of free-trade zones in the rest of the world, such as the Foreign Trade Zone No. 49 in New York, Freeport of Hamburg in Germany, Dubai Airport Free Zone in The United Arab Emirates and Port of Rotterdam in the Netherlands, are quite similar to China’s. Thus, it is imperative that China learn from the world with persistent efforts and unswerving ambition, pressing ahead China’s development on arrival of the fourth wave of reform and opening up.

     

Professor Yuan Zhigang pointed out in his speech that China faces transition against the background of globalization. The free-trade zone can facilitate the transition from a traditional economy to a new model by serving China’s global strategy and participating in the restructuring of global value chain and investment rules.

     

A new round of globalization calls for a “re-accession” for China

As globalization deepens, a globalization featuring trade in goods and tariff reduction is behind the times. In effect, the most prominent characteristic in today’s globalization process is the globalization of capital. Capital flows based on transnational enterprises have become a major driver of the new round of globalization. This requires a convenient trade and investment environment, and facilitation of service trade in particular. As the bonus brought about by China’s WTO accession is diminishing, China is in urgent need of reaching new international trade agreements so as to reassure its place in the international trade system and engage in the rule setting regarding international free trade as a responsible big country. 12 years after China’s entry into the WTO, it is faced with an arduous task of embracing the world again.

     

Opportunities and challenges for China and value of the free-trade zone

Professor Yuan believed that China is challenged by economic distortions in areas including factor input structure and regional structure etc. Although great accomplishments have been achieved in the product market reform, it remains a huge task to press ahead reform in the factor markets, namely, financial markets, land market and labor market. A deepened reform in factor markets is of overriding importance in the next round of reform. On the to-do list are reform of financial markets, land market and urbanization, people’s urbanization in particular, which calls for the reconstruction of a unified labor market. As China’s demographic dividend is descending, emphasis should be placed on the construction of factor markets, transformation of government functions and reform in state-owned enterprises.

     

Negative list and pre-establishment national treatment should be carried out in the first place. Investment in the free-trade zone should be convenient and open to both domestic and foreign participants. In terms of trade, by emphasizing financial innovation and the opening of high-end serve industry, Shanghai is to become a clearing house that takes orders from trade business around the world. Professor Yuan called for special attention to metropolitan cities without which economic restructuring can hardly be realized. Shanghai has set its goal to be a metropolitan city and China needs 10 to 20 metropolitan cities or metropolitan circles to become a top performer in economy.

     

The first half of the forum was hosted by Mr. Zhao Dingli, chairman of Shanghai Huifeng Group. The second half of the forum was hosted by Prof. Liu Hongzhong, vice-director of the Institute of Financial Studies at Fudan and chairman of the Department of International Finance of the School of Economics. Guests present discussed two topics, namely, Deregulation and Financial Innovation, Institutional Dividend and Industrial Transformation.

     

Deregulation and Financial Innovation    

Dr. Shen Jianguang, chief economist of Mizuho Securities, and Dr. Shao Yu, chief economist of Dongfang Securities shared their thoughts on the topic of deregulation and financial innovation.

     

Shen Jianguang: RMB Internationalization is the core mission the free-trade zone.

Dr. Shen believed that experiment in the financial sector should be put in the first place in the construction of the free-trade zone and RMB internationalization should be the core mission of the zone. First and foremost, the internationalization of RBM lies in its full convertibility. And the realization of full convertibility calls for easing capital control, with interest rate marketization and financial market deepening as a prerequisite. At the same time it is vital to avoid financial crises and turbulence. The reform of the free-trade zone is not only evidence of unprecedented openness, but also significant efforts to accelerate RMB internationalization, accumulate experience for financial reform in the country and RBM internationalization, and eventually, realize RBM’s role as an international reserve currency. The experiment of the free-trade zone serves not only Shanghai, but the country as a whole. The true meaning of the free-trade zone rests with its demonstrative effect and replicability in other parts of the country. By popularizing its experience, the free-trade zone is destined to make contribution to China’s future reform and development.

     

Shao Yu: Financial internationalization is the true meaning of the free-trade zone.

Dr. Shao addressed the four missions to be shouldered by the free-trade zone. First, if Shanghai is to become a center for transit and offshore trade, trade liberalization is its inevitable choice which means attracting head offices of transnational enterprises on the one hand and building a bulk commodity trading platform on the other hand. Second, investment liberalization should be achieved by making the zone a platform via which more Chinese capital is invested globally. Third, financial internationalization is the free-trade zone’s core mission, with RBM internationalization being its ultimate goal. With risk control and enhanced efficiency, control over the capital account should be fully lifted to make Shanghai a real international financial center like London. The last point concerns simplification of administrative processes. The free-trade zone should be a pilot project covering the full range of reforms from economic institutions to supervision and administration. These concerted efforts are bound to create a market economy environment that is liberal, open, innovative and in line with international norms.

     

Institutional dividend and industrial transformation

Another topic in the second half concerns institutional dividend and industrial transformation. Mr. Jia Jifeng, president of the supervision committee in Lujiazui Group, Mr. Bian Jie, director of Orient International Logistics Group, and Mrs. Rao Chengfang, analyst on the transit industry in UBS shared their views.

     

Jia Jifeng: New Cycle, New Dividend

Mr. Jia explained in his keynote speech that the so-called new cycle refers to the new cycle of reform, opening up and industrial transformation. The approval of the free-trade zone can be seen as a magnificent policy dividend for Shanghai. By aggregating trade and high-end service industry, it is to play a significant role in promoting the economic transformation of Shanghai. The free-trade zone is an experiment field through which we will be able to enhance our competitiveness.

     

Bian Jie: The Free-trade Zone and the Transformation of Enterprises  

Mr. Bian addressed the topic of “The Free-trade Zone and the Transformation of Enterprises” in which he predicted some prominent changes the free-trade zone might bring about including facilitating trade, liberating investment and finance, and promoting administration by law. By analyzing the status quo in his own firm, he came to the conclusion that at the critical point of transformation and development enterprises should promote innovation, accelerate their transformation and play an active part in the construction of the free-trade zone.

     

Rao Chengfang: Peculiarity in Location and Development Mode of the Free-trade Zone  

By analyzing different geographic peculiarities, economic endowments and development paths of different free trade zones in Korea, Dubai and Singapore, Mrs. Rao made a comparison in regard to their modes and policies. She believed that the establishment of China’s first free-trade zone in Shanghai is not only part of the central government’s strategy to deepen reform, but also the result of Shanghai’s strengths in economic growth, industrial infrastructure, geographic location and institutional innovation. There is no doubt that Shanghai will become a comprehensive free-trade zone that boasts various industries including shipping, logistics, aviation, finance, emerging strategic industries, information technology and pharmaceutics.

     

Finally, Mr. Yang Dehong, vice-president of Shanghai International Group and co-president of the China Financiers Club at Fudan University made the closing speech. He summed up the major points of the speeches and concluded that the establishment of the free-trade zone is evidence of Chinese people’s longings for reform. As economic globalization spreads around the world, China cannot afford to miss the trend.

Translated by Chen Siyu