1、The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South CooperationThe Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South CooperationGeneva,2023ii 2023,United NationsT

2、his work is available through open access,by complying with the Creative Commons licence created for intergovernmental organizations,at https:/creativecommons.org/licenses/by/3.0/igo/.The findings,interpretations and conclusions expressed herein are those of the authors and do not necessarily reflec

3、t the views of the United Nations or its officials or Member States.The designations employed and the presentation of material on any map in this work do not imply the expression of any opinion whatsoever on the part of the United Nations concerning the legal status of any country,territory,city or

4、area or of its authorities,or concerning the delimitation of its frontiers or boundaries.Mention of any firm or licensed process does not imply the endorsement of the United Nations.Photocopies and reproductions of excerpts are allowed with proper credits.This publication has not been formally edite

5、d.United Nations publication issued by the United Nations Conference on Trade and DevelopmentUNCTAD/GDS/2023/5eISBN:978-92-1-358616-7ivThe Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South CooperationACKNOWLEDGEMENTSThis publication

6、 was prepared under the supervision of Richard Kozul-Wright,Director of the UNCTAD Division on Globalization and Development Strategies(DGDS).Dawei Wang(UNCTAD Division on Globalization and Development Strategies)coordinated the research and collaborated on the drafting of the report text.The report

7、 team appreciates the substantive comments received from Andrs Miguel Rondn Anzola and Anida Yupari Aguado of UNCTAD.UNCTAD gratefully acknowledges the substantive contributions to the draft text from Akebe Oqubay(SOAS University of London)and Dan Zhang(CAITEC).The team thanks Carter Dougherty for c

8、opy-editing and Florence Hudry for administrative support and formatting the publication.The funding support received by UNCTAD from the Government of China for the conduct of research is appreciated.The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transform

9、ation and South-South CooperationvFOREWORDThe pace and breadth of Chinas economic integration,structural transformation and reduction in poverty over the last four decades is unprecedented.Among the multiple factors that have driven this achievement,Chinas economic policy formulation is critical to

10、understanding its success.Chinas reform and opening up began with a series of policy experiments in both the urban and rural areas,with the more successful outcomes extended and the less so revisited or abandoned altogether,an approach which has been replicated across sectors and over subsequent dec

11、ades.Experimentalism and pragmatism,two basic features of Chinas economic policy formulation,have been fully integrated in the countrys Pilot Free Trade Zones(FTZs)strategy,which started from Shanghai in 2013,against the background of the Global Financial Crisis.Since the first FTZ in Shanghai,the n

12、umber of zones has expanded to 21.Despite their title,the scope of Chinas FTZ goes far beyond trade(and investment)promotion to include a variety of policy dimensions;government functions and services,manufacturing sector upgrading,services sector opening,financial deepening,skills development and g

13、reen city development.South-South Cooperation and many others have all been introduced into those 21 FTZs for“experimentation”.Consequently,institutional innovation is defined as the essence of the FTZs strategy.This publication aims to discuss the genesis,features and performance of the FTZs strate

14、gy.It also presents comparative analysis between FTZs and other special economic zones in other economies in the region.Furthermore,the volume examines the role of FTZs in promoting local SDG progress,industrial development,and South-South cooperation through three case studies.The research has been

15、 funded by the Chinese Government at the occasion of the 10th Anniversary of the countries FTZs strategy.Richard Kozul-WrightDirector Division on Globalization and Development Strategies United Nations Conference on Trade and DevelopmentviThe Role of Chinas Pilot Free Trade Zones in Promoting Instit

16、utional Innovation,Industrial Transformation and South-South CooperationTABLE OF CONTENTSIntroduction .1Chapter 1.Chinese Pilot FTZs:background and features .3Chapter 2.Pilot FTZs and Chinese economic catch-up .7Figure 1:Annual inflow of foreign direct investment(FDI)to China from 2013 to 2022 (in b

17、illion US$at current price).8Figure 2:Exports in goods between 2013 and 2022(in billion US$at current price).8Figure 3:Exports in services between 2013 and 2022(in billion US$at current price).9Chapter 3.Case 1:Development of AI Industry in Lin-gang Special Area of Shanghai FTZ.11Chapter 4.Case 2:Pr

18、omoting Economic Cooperation and Integration with ASEAN.15Conclusions.18Appendix .20Table 1:A summary matrix of specialization of the 21 Pilot FTZs.20Table 2:Taxonomy of Chinese development zones.24Selected references.25The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,

19、Industrial Transformation and South-South CooperationviiLIST OF FIGURES,TABLES,AND ABBREVIATIONSList of FiguresFigure 1:Annual inflow of foreign direct investment(FDI)to China from 2012 to 2022(in billion US$)Figure 2:Value of export of goods from China between 2012 and 2022(in billion US$)Figure 3:

20、Exports in services between 2013 and 2022(in billion US$at current price)List of TablesTable 1:A summary matrix of specialization of the 21 Pilot FTZsTable 2:Taxonomy of Chinese industrial hubs(2023)viiiThe Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transf

21、ormation and South-South CooperationLIST OF ABBREVIATIONS AfCFTA African Continental Free Trade AreaASEAN Association of Southeast Asian Nations BRI Belt and Road InitiativeCBECZs Cross-Border Economic Cooperation Development Zones,ChinaCBZs Comprehensive Bonded Zones(China)COMTRADE United Nations C

22、omtrade database ETDZs Economic and Technological Development Zones(China)FDI Foreign Direct Investment FIAS Multi-Donor Investment Climate Advisory Service of the World Bank GroupFTZ Free-Trade ZoneGATT General Agreement on Tariffs and Trade,United Nations GDP Gross Domestic Product HIDZs High-Tech

23、 Industries Development Zones(China)MOFCOM Ministry of Commerce,ChinaNDRC National Development and Reform Commission,ChinaR&D Research and Development RCEP Regional Comprehensive Economic PartnershipSEZs Special Economic ZonesUNCTAD United Nations Conference on Trade and Development US$US DollarWCO

24、World Customs Organisation WIPO World Intellectual Property Organisation WTO World Trade Organisation Yuan,RMB Chinese currencyThe Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South Cooperation1INTRODUCTION Development is,at its core

25、,a transformational process,combining a series of interactive and cumulative linkages to create a virtuous cycle of increased resource mobilization,faster capital accumulation,greater employment,higher incomes,expanding markets,and more investment(UNCTAD,2016).For developing countries,integration wi

26、th neighbouring economies and beyond is essential,providing access to new markets,investment opportunities and more advanced technologies,including most recently through participation in global and regional value chains.But integration is also associated with risks and is not automatically translate

27、d into productivity growth and structural transformation.Developing countries hence need appropriate strategies to manage integration and the policy space to ensure that they benefit from the integration process.But what exactly?The answers vary across countries and development stages and depend on

28、a constantly changing global context.A one-size-fits-all solution does not exist.Instead,policy makers need to learn,explore,test,and adjust to evolving circumstances.Chinas Pilot Free Trade Zones(FTZs)are one such experiment.The Global Financial Crisis(GFC)shocked the world economy profoundly in 20

29、08-2009 and left a lasting impact.From 2005-2010,the average annual growth rate for developing and advanced economies were 6.57%and 0.77%,respectively.But for the period of 2010-2015,annual average growth of developing region dropped to 5.37%,and developed countries saw an increase to 1.64%.For the

30、period of 2015-2020,the rates fell further to 3.43%(developing countries)and 1.19%(developed countries).FDI flows and trade growth rates were also sluggish.Global FDI has never returned to pre-GFC level.China introduced its Pilot FTZs in September 2013,as part of its response to the external uncerta

31、inties triggered by the GFC,to explore new ways to deepen Chinas reform and opening up1.Since then,China has established 21 FTZs involving 51 cities.From a global perspective,FTZs,on the one hand,are analogous to special economic zones(SEZs).SEZs carry varying names in the respective countries legis

32、lation(such as industrial hubs,export-processing zones,industrial parks,and innovation hubs,etc.),but all aim to facilitate industrial activity through fiscal and regulatory incentives and infrastructure support is a common feature(UNCTAD,2019).But,on the other hand,FTZs are also distinct from typic

33、al SEZs.The core function of FTZ is institutional innovation to improve government service,expand integration(notably in the services sector),advance reform and encourage technology R&D for industrial transformation through policy tests and experiments.In the last decade,the 21 pilot FTZs have catal

34、yzed Chinas development strategies update,deeper economic integration,trade and FDI promotion,and industrial high-quality development.According to the Ministry of Commerce(MOFCOM)2,regarding institutional innovation,China has implemented over 3,400“pilot reform assignments”in 21 FTZs and has replica

35、ted 302 institutional innovations at national level;in terms of facilitating industrial transformation,FTZs,through reforms in trade,investment,financial,science and technology policies,have promoted“high quality industrial agglomeration development”;regarding the services sector,FTZs have also supp

36、orted development of financial and shipping services.In 2022,covering less than 0.4%of land space,FTZs contributed 18.1%of FDI inflow and 18.1%of imports and exports of China.Along the strong growth of trade and FDI in FTZs,the makeup of Chinese exports has shifted towards technologically intense go

37、ods,such as electrical,computer,vehicles and machinery,highlighting the advances in technological capability.FTZs have also reinforced Chinas economic cooperation and integration with other regional developing economies particularly with ASEAN 1 Notification from the State Council on Overall Program

38、me of China(Shanghai)Pilot Free Trade Zone.https:/ 2 Statements from MOFCOM,Ministry of Transportation,and State Administration of Foreign Exchange,in the press conference of State Information Office on 28th September 2023 https:/ Role of Chinas Pilot Free Trade Zones in Promoting Institutional Inno

39、vation,Industrial Transformation and South-South Cooperationmembers(South-South Cooperation),which therefore has created the synergies with the countrys integration initiatives such as Regional Comprehensive Economic Partnership(RCEP),ASEAN-China Free Trade Agreement(ACFTA),and Closer Economic Partn

40、ership Arrangements(CEPA),etc.This report firstly aims to provide empirical evidence on the genesis of Chinese pilot FTZs,their rationale,purposes,then examine the role of FTZs in promoting Chinas industrial transformation and external economic relations,through case studies.The comparative insights

41、 between FTZs and 1)Chinas other development zones such as Economic and Technological Development Zones(ETDZs)and High Tech Industrial Development Zones(HIDZs);2)industrial hubs in other Asian economies(South Korea,Singapore,Malaysia,and Vietnam)will also be briefly discussed.The report will be orga

42、nized as follows:Chapter 1 will review the background,nature,and governance of Pilot FTZs,which is followed by Chapter 2 focusing on Chinese Pilot FTZs and economic catch-up.Chapter 3 analyzes the effect of FTZ in advancing industrial development,using the example of AI industry in Shanghai FTZ(Lin-

43、gang Special Area).Chapter 4 presents a case on the role of FTZs in promoting Chinas economic cooperation and integration with ASEAN economies(South-South Cooperation),and the concluding section presents key findings,a brief comparison with the industrial hubs in other Asian economies,and suggestion

44、s for future research.Chapter 1-Chinese Pilot FTZs:background and features 3ChApTER 1.ChINESE pILOT FTZS:BACKGROUND AND FEATURES 1.1.Background and progress The first Pilot FTZ in Shanghai was established in September 2013,when the world was recovering from the Global Financial Crisis(GFC)but was st

45、ill struggling to return to a strong and sustained growth path(UNCTAD,2013).International trade in goods and services did not resume the rapid growth of the years preceding the crisis.FDI saw a sharp decline of 18%in 2012,following three consecutive years of weak growth after the GFC.A slowing world

46、 economic growth with export market contraction presented challenges for China as well.Chinas growth was supported by a large stimulus package after the GFC,and remained above 9%from 2008-2011,but dropped to below 8%in 2012.In response to the external uncertainties and domestic challenges including

47、over-capacity in some sectors,food security,rising debt levels,structural unemployment,and environmental degradation,the Chinese government identified three key dimensions for its economic policies,namely“stabilizing growth,transforming structure,and advancing reform”.Launching the Pilot FTZ initiat

48、ive was part of the strategy to explore effective ways to bolster economic growth through deepening economic reform.Against such background,the first FTZ directive,Masterplan of Chinas Pilot Free Trade Zone(Shanghai),was issued by the State Council on 18 September 2013.Since the inception of the fir

49、st FTZ in Shanghai,China has established a total of 21 Pilot FTZs:in Guangdong,Tianjin,and Fujian in 2015;in 2017,an expansion to regions in central and western parts of China,including Liaoning,Henan,Hubei,Chongqing,Sichuan,Shaanxi and Zhejiang.In 2018 came Hainan.Then in 2019,China approved the es

50、tablishment of Pilot FTZs in Shandong,Jiangsu,Guangxi,Hebei,Yunnan,and Heilongjiang.In 2020,the latest batch of FTZs were approved in Beijing,Hunan,and Anhui.Those FTZs involve 51 cities in 21 provinces including the entire Hainan Island.(see table 1 in the appendix)During this process,the Chinese g

51、overnment established a governing mechanism named Joint Meeting Mechanism of Inter Ministries on the Work of Pilot FTZs(Joint Mechanism)under the State Council.Around 30 ministries or agencies at national level are included in this Joint Mechanism including MOFCOM,National Development and Reform Com

52、mission(NDRC),Ministry of Finance(MOF),Peoples Bank of China(PBC),General Administration of Customs,and the State Administration for Market Regulation,etc.MOFCOM plays a coordinating role in the Joint Mechanism through its specific Department on FTZs coordination.At the local level,provincial or mun

53、icipal governments are responsible for the implementation and development of respective FTZs.Such governance structure indicates higher vitality and sensitivity of FTZs than that of other development zones in China.In contrast,ETDZs and HIDZs fall directly under MOFCOM and the Ministry of Science an

54、d Technology,respectively,not the State Council.4The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South Cooperation1.2.Broad goals,experimental approach and local specificities Overarching goalsDespite the name“free trade”,the policy

55、 scope of FTZs is very wide,beyond just trade policies.In the Master Plan of Shanghai FTZ issued by the State Council,the overall mission of Shanghai FTZs was exploring“new ways”and“new experience”for deepening reform and opening up of Chinese economy.Through institutional and policy innovation and

56、experimentation,FTZs aim to achieve broader goals combining policy innovation and scaling up.Table 1 summarizes those key features of all Pilot FTZs.First,the government has recognized the need for reforming and improving government services to match international market economy standards for suppor

57、ting economic and business development,which are essential for an internationally competitive economy.Institutional innovation was anchored in benchmarking the best practices and international standards.And there has been increasing emphasis on the selected piloted institutional innovations based on

58、 scalability and replicability,a critical aspect of policy learning.Secondly,China also realizes that it needs to further advance its industrial transformation and upgrading,including attracting investment,talent,and technology,both foreign and domestically,into high-tech industries and R&D to foste

59、r an innovation-driven economy.Thirdly,in response to the sluggish global trade and FDI growth since the GFC,China has looked to test various policies with respect to FDI and services sectors,including the pre-establishment treatment,negative list management approach,reforming management of exchange

60、 rate regime,further opening-up of services sectors such as financial services,insurance services,transportation services,and other business services.Local specificitiesIn addition to the somewhat common framework of institutional innovations,all Pilot FTZs have regional specializations based on a p

61、rovinces competitive positioning.Identifying the peculiarities of local conditions and positioning on regional advantages and peculiarities has been emphasized.As such,the 21 pilot FTZs are not identical and are not based on generic prescriptions.Table 1 summarizes the key local features of each FTZ

62、s.For example,Shanghai FTZ focuses on its status as an international and global financial and logistical hub,including the regional headquarters of leading multinational corporations,comparable to Hong Kong and Singapore,and its innovation and technological leadership strength.The Hunan Pilot FTZ fo

63、cuses on China-Africa economic relations and the Guangdong-Hunan regional economic corridor.Yunnan and Guangxi Pilot FTZ has concentrated on cross-border economic cooperation with neighboring ASEAN countries.Success has been uneven,and a range of factors shape outcomes.A comparative perspective of t

64、he Pilot FTZs is vital to ensure that lessons are learnt from all Pilot FTZs,including failed,partially successful and successful ones.Both success and failure are present in all policy design and implementation phases.Therefore,this report,undertakes two case studies on the policy framework and eff

65、ects of FTZs in Shanghai(Lin-gang Special Area)on AI industry,and several FTZs such as Guangxi on economic cooperation with ASEAN economies.Chapter 1-Chinese Pilot FTZs:background and features 51.3.Pilot FTZs and other development zones in ChinaThe pilot FTZs initiative follows,to some extent,four d

66、ecades of experience and knowledge of using development zones as a primary tool for opening and reform,but also differ from other zones in several aspects.Development zones were part of the original industrial policy framework and involved significant policy learning through piloting and phasing in.

67、Chinas economic opening up process started from the establishment of four special economic zones(SEZs)in Shenzhen,Zhuhai,Shantou(three in Guangdong Province)and Xiamen(one in Fujian Province)in 1979.Later in 1988,Hainan Province became the fifth SEZ.In the early stage,the focus of the SEZs was to at

68、tract FDI to build processing trade and accumulate export revenues.The five SEZs had historical connections with neighboring Hong Kong,Macau,and Taiwan Province of China,which were newly industrial economies with capital,technology,market network and management experiences.Establishing SEZs were soo

69、n proven a very successful policy decision,particularly in Shenzhen,which gave the Chinese leadership the confidence to expand development zones further.In 1984,14 coastal cities(such as Tianjin and Guangzhou)were identified as“opening up cities,”which allowed them to adopt economic policies to inte

70、grate in global markets,though with less preferential policies than the four SEZs.In the Chinese economic policy context,SEZs specifically refer the five cities/province,which normally cover a whole city or even larger area.China didnt build more SEZs after Hainan but has established smaller size de

71、velopment zones such as“economic and technological development zones”(ETDZs)and“high-tech industrial development zones”(HTDZs)across the country.National ETDZs were initially established in coastal cities and later in central and western China.By mid-2023,over 230 ETDZs spearheaded Chinas emergence

72、as a manufacturing and export powerhouse.The focus on ETDZs has matured since 2012,which has shifted from expansion towards industrial upgrading and developing the technological intensity of industries.Provincial and city administrations have played a decisive role in expanding ETDZs,and about 2,000

73、 provincial-level development zones have been created.In 1988,the government launched national high-tech industrial development zones(HIDZs)in selected cities,such as Beijing and Shanghai,with better infrastructure and a network of research institutions and universities.These gradually expanded at t

74、he national level.In 2023,179 high-tech parks focused on developing innovation and technological capability,nurturing talent,and offering a world-class infrastructure and innovation ecosystem.An additional 23 indigenous innovation demonstration zones were built to boost local innovation.In the gover

75、nments 14th Five-Year Plan,a target of 50 new high-tech zones was to be made between 2020 and 2025.In addition to ETDZs and HTDZs,which were responsible for the lions share of Chinas productive transformation,diverse types of development zones were developed to address specific challenges and goals,

76、including the bonded area and export-processing zones focusing on improving customs and logistics,primarily within existing ETDZs.The new area development and Pilot FTZs were introduced in the 2010s(Table 2).3 From the start,Chinese development zones shared a common foundation and features(see Table

77、 2).All zones served the overall opening up and reform strategy and industrial policy framework aligned with specific stages of development.4 Five-year plans and longer-term development strategies outlined these plans.Focusing on industrial transformation and technological capability,the attraction

78、of productive investment,export growth and the competitiveness of the overall economy has guided all development zones to provide the required industrial ecosystem.Beyond the function of promoting economic integration 3 See Lin,Xu,Xia(2020);Kuo and Zhang(2020);Yin(2020);Zheng and Aggarwal(2020).4 Se

79、e Oqubay,Cramer,Chang,and Kozul-wright(2020)for theoretical underpinnings and empirical evidence on industrial policy.6The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South Cooperationand industrial capacity building,the improvement

80、 of governance systems were also part to the purpose of those development zones and were supported by well-designed experiments and a phased approach to allow experience acquisition.A complex set of governance systems and policy tools were used,including directives from the State Council and ministr

81、ies.Second,The introduction of Pilot FTZs certainly followed the generally successful lessons from Chinas practice of development zones.But establishing the FTZs was not an end per se,which may undertake a broader and more significant mission than previous development zones such as ETDZs and HTDZs.F

82、irst,the aim was to improve governance systems and economic governance through continuous institutional innovations.For example,in the policy framework of Shanghai FTZ,the first“task and measure”is transforming government function and reforming government service approach,including enhancing inter-a

83、gency coordinating,improving administration transparency,building information platform.The policy framework emphasized the government function should transformed from“pre-approval”centered approach to monitoring-regulating centered approach.In Qingdao FTZ,digital technologies such as AI and big data

84、 have been applied to establish a smart enterprise registration system.It is envisaged that this will drive much more transparent,efficient and convenient government service which is essential for sustained economic growth and integration into the world economy.Second,the Pilot FTZs aim to accelerat

85、e industrial upgrading through the shift towards an innovation-driven economy,advancing innovation and R&D capacity,and developing high-tech industries.Promoting FDI and improving trade facilitation management for this purpose have also been included in the plan of many FTZs.This looked similar to t

86、he purpose of ETDZs or the five Chinese SEZs.Industrial development and upgrading are the shared feature for the ETDZs and FTZs.But for ETDZs,one of the key approaches is to facilitate Chinas participation in the Global/Regional Value Chains through for example processing trade(Zhang,et.al,2022).The

87、refore,FDI promotion based on preferential treatment is a key feature of many ETDZs.While for the FTZs,the focus is using more comprehensive and innovative policy measures,which is far beyond FDI promotion,to build advanced manufacturing sectors that has been identified by national plans,particularl

88、y for the FTZs in Shanghai,Hubei,Jiangsu,Anhui amongst others.Though promoting GVCs has been referred occasionally,the path in promoting industrial“high quality development”is building“featured industrial agglomeration”,advancing“integrated industrial innovation”,and“optimizing enabling environment

89、for industrial development”including facilitating freer flow of factors such as capital,technologies,talents,and data through reforms in various policy areas.5Third,the Pilot FTZs highlight further opening of the services sector and financial integration,such as removing restrictions on logistics an

90、d shipping services,starting the banking sectors opening,expanding Chinese RMB for currency settlement and cross-border registration,and testing new management of capital flow.The opening of services included developing e-commerce and digital platforms as the dominant trading modality.For example,in

91、 Qingdao Area of Shandong FTZ,through building smart port,shaping agglomeration of shipping service factors(including port service,shipping financial services,ship management and examinations),improving the governments maritime administration,Qingdao has consolidated its advantages in global shippin

92、g industry including rank as the most efficient container port in the world.The container throughput in 2022 reached 25.67 million TEU,representing 8.3%growth from the previous year,which made it the worlds fifth container port.6 5 Statement from MOFCOM official in the press conference of State Info

93、rmation Office on 28th September 2023 https:/ https:/ Chapter 2-Pilot FTZs and Chinese economic catch-up7ChApTER 2.pILOT FTZS AND ChINESE ECONOMIC CATCh-Up The pilot FTZs and the other development zones were not isolated or stand-alone entities and are part of Chinas broader economic policy framewor

94、k.Conducting a thorough assessment of the direct contribution of FTZs to Chinas overall economic growth remains challenging,given that the dispersion of the zones,variation of the policies,experimental features and data availability.But observing several key aspects of Chinese economic catch-up such

95、 as industrial transformation,trade,FDI,and innovation can help to understand the role of FTZs which will give an overall background paving the way for the in-depth case studies in chapter 3 and 4.2.1.Facilitating industrial transformation strategy China has updated its industrial strategy in recent

96、 years,focusing further on smarter and greener industry.In the ongoing 14th Five-Year Plan,under the overarching“manufacturing powerhouse strategy”,two key policy documents have been issued:Industrial Green Development Plan and Smart Manufacturing Development Plan.In the 14th Five-Year Plan and thos

97、e associated documents,China identifies wide ranges of advanced manufacturing and R&D priorities,such as:high-end new materials,smart manufacturing and robotics,smart factories and supply chains,significant technological equipment(high-speed train,aerospace equipment,etc),biomedicine and high-end me

98、dical equipment,new energy vehicles,developing low-carbon technologies,etc.In addition,the industrial transformation was accompanied by a strategy of infrastructure development,which significantly accelerated industrial and economic agglomeration and sped up regional and urban development.For exampl

99、e,the government expanded high-speed railway lines from 11,000 km to over 42,000 km(national,regional and intercity)between 2013 and 2022,which shrank space and travel time,contributing to a more efficient economic system.Over 10,000 km of urban rapid rail transit and a metro system supporting urban

100、 mobility and industrialization was built during this period.Against the backdrop of the industrial transformation strategy at the national level,the policies implemented in the Pilot FTZs have also seen the increasing component of manufacturing and industrial development,as we can see in the FTZs o

101、f Anhui,Hubei,Shanghai(Lin-gang New Area),and Zhejiang,etc.FTZs can help to attract talents and encourage R&D in targeted sectors,foster agglomeration of certain industries,and even facilitate inter-city or province economic corridors to support industrial development.In addition to the manufacturin

102、g sector,FTZs have also underpinned the development of services sector,particularly in e-commerce,international logistics,shipping and financial services,which are the priorities in FTZs framework as we discussed in Chapter 1.In Chapter 4 and 5,the report shows how the FTZs helps industrial developm

103、ent,both manufacturing and services,in Shanghai(AI)and Qingdao(shipping)through case studies.2.2.Growth of FDI and international tradeFDI and trade promotion is an integral part of the FTZs function since it aims to build deeper integration with the global economy.Over the last decade,Chinas real GD

104、P(in 2015 price of USD)increased from US$9.62 trillion in 2013 to over US$16.28 trillion in 2022.Between 2013 and 2022,institutional innovations and changes by pilot FTZs contributed to transformation,entailing the building of a globally competitive and innovation-driven economy.This can be measured

105、 from the performances of FDI inflow into China,trade growth,innovation capabilities in R&D,and services sectors such as the digital economy and internationalization of RMB.8The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South Coop

106、erationRegarding FDI attraction,FDI inflow(measured in current price USD)to China increased from US$123.9 billion in 2013 to US$189.1 billion in 2022,a 52.6 per cent increase,with a significant jump in 2021.FDI outflow grew from US$107.9 billion to 146.5 billion in the same period.The total stock of

107、 FDI for the period was close to US$3.8 trillion for inward and 2.9 trillion outward.(see Figure 1).Figure 1:Annual inflow of foreign direct investment(FDI)to China from 2013 to 2022(in billion US$at current price)200002000022Source:UNCTADstat.C

108、hinese exports of goods increased from US$2.21 trillion in 2013 to US$3.6 trillion in 2022,growing 62.7 per cent.The composition of goods has shifted towards more technology-intensive goods and away from light manufacturing.While this growth rate is lower than the expansion between 2000 and 2006,the

109、 trend is positive given the global economic slowdown after the GFC and the COVID-19 global pandemic and cascading crises.The growth in 2021 and 2022 was exceptionally high,up 39 per cent from 2020(see Figure 2).The exports of services have even grown faster from 207 billion USD in 2013 to 424.1 bil

110、lion USD in 2022,growing over 100 per cent.Figure 2:Exports in goods between 2013 and 2022(in billion US$at current price)4000350030002500200002000022Source:UNCTADStat.Chapter 2-Pilot FTZs and Chinese economic catch-up9Figure 3:Exports in services between

111、2013 and 2022(in billion US$at current price)45040035030025020000022Source:UNCTADStat.2.3.Innovation and technology capabilityInnovation has been an important focus of efforts.The share of GDP expenditure on research and development increased from 1.9 per

112、cent in 2012 to 2.6 per cent in 2022,a significant increase(see Figure 3).In 2022,China spent three trillion RMB(US$450 billion)on research and development,ranking second in the world.In terms of R&D personnel,it almost doubled in numbers,from 3.25 million in 2012 to over six million in 2022.In The

113、Global Innovation Index,provided by the World Intellectual Property Organization(WIPO)to give insight into the quality of institutions and innovation capability,China has progressed in its overall ranking from 34th in 2012 to 11th in 2022.Regarding institutions(political,regulatory quality,business

114、environment),the index shows that China ranked 121 out of 141 countries in 2012,but it has jumped to 42 by 2022,delivering positive outcomes in institutional innovation.However,it also indicates that China has a long way to go regarding governance systems.The index further shows a solid foundation i

115、n infrastructure and improved human capital and research from 84th to 20th during the same period.Like all global indices,the measurement has limitations and bias.In a nutshell,Chinas Pilot FTZs have gone along with the expansion and advancement of industrial transformation,trade,foreign investment,

116、innovation capabilities of China over the last decade.7 In 2022,these 21 Pilot FTZs achieved a total import and export value of 7.5 trillion RMB,representing a year-on-year growth of 14.5%.The actual utilization of foreign investment reached 222.52 billion RMB,with a year-on-year increase of 4.5%.De

117、spite occupying less than 0.4%of the total area,Pilot FTZs contributed 17.8%of the total import and export value and 18.1%of the actual FDI8.Beyond the figures,FTZs have advanced Chinas economic reform and improved government services system that have contributed to building better doing business en

118、vironment.According to MOFCOM,7 The State Councils directive(2023b)underlines the system opening and continuous reform priorities,including:“Promoting the innovative development of trade in goods;promoting the freedom and facilitation of trade in services;facilitate the temporary entry of business p

119、ersonnel,promote the healthy development of digital trade;increase efforts to optimise the business environment;improving the risk prevention and control system.”8 State Council Information Office,http:/ 10The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Tra

120、nsformation and South-South Cooperationin the last decade,Chinese government assigned over 3400 policy tests in the 21 FTZs,in which 302 institutional innovation outcomes have been replicated at national level.9 A lot of concrete examples from the FTZs could also showcase the impact of FTZs in advan

121、cing Chinas economic catch-up.For example,Sichuan FTZ promoted the industry of aviation maintenance and manufacturing in the Province.It has attracted several key enterprises,including Airbus,AMECO,Sichuan International,and Sichuan Airlines Maintenance Base,which has been able to provide maintenance

122、 service to internal clients in the FTZ area.Another example is Tianjin FTZ that performed well in FDI promotion.By 2022,the FDI stock in the FTZ area was USD 14.43 billion,which accounted for about 40%of the total FDI stock of Tianjin city.And in Guangxi FTZ,through the measures of“green channel”fo

123、r imported fruits,it has facilitated the imports of perishable agricultural products from ASEAN economies.In Chapter 3 and 4,well examine the role of FTZs more deeply through case studies.For the next step,MOFCOM has outlined key work priority lists for the of 21 FTZs from 2023-2025 which cover poli

124、cy areas such as building exchange platform of financial assets(Shanghai and Jiangsu FTZ),world bio-medical science agglomeration(Shanghai FTZ),creating a global supply chain management center(Guangzhou FTZ),innovative medical and health service(Tianjin),new IP protection mechanisms(Zhejiang FTZ),gr

125、een manufacturing hub(Hubei)to deepening economic and trade cooperation with RCEP economies,especially ASEAN economies10.9 According to the statement of MOFCOM official at the press conference of State Information Office https:/ The details of the policy priorities can be downloaded from the MOFCOM

126、official site https:/ Chapter 3-Case 1:Development of AI Industry in Lin-gang Special Area of Shanghai FTZ11ChApTER 3.CASE 1:DEVELOpMENT OF AI INDUSTRY IN LIN-GANG SpECIAL AREA OF ShANGhAI FTZShanghai is Chinas first FTZ,which has been expanded twice.The first phase(2013-2014)was launched on a land

127、area of 28.8 square kms and later expanded to 120 square km,comprising two ports,an international airport,a financial district,and high-tech parks(see Table 1).Shanghai FTZ covers very broad policy area from government service,financial sector reform,services opening up,trade facilitation through Si

128、ngle Window approach,FDI management reform featured by Negative List and pre-establishment treatment,and high-tech industry development.This case focuses on the AI industry development in Lin-gang Special Area in Shanghai FTZ.3.1.AI industry development in Shanghai FTZAt city level,Shanghai identifi

129、es AI industry as an important driver for its economic development.The Overall Plan for Lin-gang Special Area positions the Area as a demonstration zone where AI application should be accelerated in more scenarios and the development of new industries and new business formats such as intelligent veh

130、icles,intelligent manufacturing,and intelligent robots.Since its inception,Lin-gang Special Area has attracted domestic and international resources dedicated to innovation,built cutting-edge industrial clusters such as the AI cluster for key core technology breakthroughs,and pushed the output value

131、of AI enterprises above the designated size in Shanghai to exceed RMB 380 billion in 202211.The rapid AI industry development are benefited from the advantages of Lin-gang Area in“digital city,future cars,and smart manufacturing”which helps to build whole-area AI scenario and attract AI enterprises1

132、2.3.2.Policy and MeasuresLin-gang has issued preferential policies and measures that facilitate the development of enterprises in many ways,including the introduction of tax incentives,facilitation of the receipt and payment of foreign exchange funds;platform construction in the AI industry;expansio

133、n of the scenarios where AI can be applied;improvement of support for data,computing power,algorithms and other factors.First,introducing tax incentives and streamline the receipt and payment of foreign exchange funds to enhance capital flow.The Lin-gang Special Area implements preferential policies

134、,such as the introduction of tax credits and simplification of cross-border fund transactions,providing ample financial support for the development of the AI industry.Lin-gang applies a reduced corporate income tax rate of 15%to qualified enterprises in the region engaged in production and R&D in ke

135、y sectors such as integrated circuits,AI,biomedicine,and civil aviation.This reduced tax rate remains valid for the first five years after the establishment or settlement of the enterprises.The area also offers a subsidy to offset the difference in individual income tax payable by overseas talents w

136、orking in the region with high-end or highly sought-after skills.11 Media report from Jiefang Daily on the Government briefing to Shanghai Municipal Peoples Congress on three advanced innovative industries:https:/ Media report on Building AI High-land and Smart Vehicle Industry in Lin-gang Area,http

137、s:/ 12The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South CooperationIn terms of streamlining the receipt and payment of cross-border funds,the Lin-gang FTZ Area issued rules introduce nine capital account reform measures and four

138、 current account facilitation measures.These measures focus on promoting the reform and innovation of the cross-border investment and financing system,implementing government reforms that simplify processes,delegate authority,and enhance government services,and improving the efficiency of market-ori

139、ented resource allocation.Second,Lin-gang has attracted numerous AI enterprises by supporting the development of platforms for research and development,services,and more.This support helps AI enterprises enhance their scientific and technological innovation capabilities and improve their ability to

140、serve these enterprises.To boost the research and development capabilities of businesses,Lin-gang has implemented a series of policies to promote platform construction in the AI sector.One policy in 2020 aids the creation of open-source deep learning platforms.These platforms assist companies in dev

141、eloping independent and controllable AI open-source frameworks and building open-source and public platforms that prioritize deep learning frameworks.Another policy,released in July 2021,emphasizes the need to continually strengthen the leadership of high-end industries like AI and develop AI open-s

142、ource and public platforms.It suggests making full use of the scientific and technological innovation resources of companies,universities,and research institutes to create technical platforms for vision and voice recognition technologies and establish an industrial chain covering both the platform a

143、nd application.These policies encourage eligible enterprises,colleges and universities,scientific research institutes,and industry associations in Lin-gang to build AI service platforms catering to global needs.These platforms provide AI enterprises with services in technology,markets,capital,import

144、 and export trade,law,taxes,and other areas.These organizations can also create platforms that gather demands for AI technologies from various industries and services and publish solutions provided by AI enterprises.Third,expanding AI application scenarios in Lin-gang Area.Such efforts make the tech

145、nology more useful and further supports the development of the AI industry.Among these policies,Lin-gang supports demonstration applications in diverse scenarios.It implements the“Lin-gang Special Area AI+”program that seeks to makes the area a forerunner in applying the latest AI achievements from

146、around the world and build innovative applications that could be usable worldwide13.Lin-Gang is seeking breakthroughs in ICVs,service robots,interactive terminals,intelligent wearables and drones to scale up high-end intelligent terminals and to expand demonstration AI application scenarios by focus

147、ing on intelligent manufacturing,smart cities,and digital security scenarios.Finally,Lin-gang has stepped up efforts to promote data opening,computing power development,and algorithm open source.It proposes to provide basic assistance for technological R&D by supporting the construction of public AI

148、 data sets and the establishment of high-quality and open AI training data sets,standard testing data sets and other resource pools targeted at basic theoretical fields such as AI core algorithms,deep learning and autonomous and collaborative control and at core and key technologies such as smart ch

149、ips,human-machine interaction and data mining in key research directions such as computer vision,natural language processing,intelligent voice,and unmanned driving to meet the R&D requirement on key products.Meanwhile,Lin-gang leverages the advantage brought by its system innovation,accelerating the

150、 construction of major digital infrastructure such as the international data port,the new Internet exchange center and the supercomputing center to develop key areas in AI industry.It conducts pilot security assessment of cross-border data flow and establishes data security management mechanisms suc

151、h as data protection capability certification,data circulation backup review,cross-border data circulation and transaction risk assessment.Through multiple explorations,the Lin-gang approach is“based on scenario innovation pilot with the combination of risk self-assessment and security assessment”.T

152、hese efforts 13 The local government policy in Lin-gang Area on the Notification on Various Policy Measures in Developing AI Industry in Lin-gang Area of Shanghai FTZ,https:/ 3-Case 1:Development of AI Industry in Lin-gang Special Area of Shanghai FTZ13ensure secure and controllable cross-border dat

153、a flow while providing large-scale and high-quality data sets for the development of the AI industry.The development of the AI industry made Lin-gang realize that AI enterprises are concerned more about whether their computing power requirements can be met than about the supporting policies such as

154、subsidies.Answering the call of companies engaged in this industry,Lin-gang announced plans in June 2023 to establish a diverse computing power supply system with intelligent computing power as the mainstay,basic computing power and supercomputing power as cooperative side wings by 2025,after comple

155、ting such major tasks as improving the computing power supply capacity,optimizing the computing power resources allocation,consolidating the computing power support foundation,and accelerating the application in multiple industries and multiple scenarios.Lin-gang applies AI algorithms in an all-roun

156、d manner,supports enterprises to conduct research on basic core technologies such as core algorithms and key common technologies,and transforms industry data into industry know-how via algorithms to empower the development of the whole industry.3.3.AI industry development in Shanghai FTZThe industri

157、al policies in Lin-gang Special Area has accelerated the development of AI industry in the Area.For example,the policies have attracted SenseTime,one of the“Four AI Tigers”in China,to place its intelligent computing center and intelligent vehicle segment in Lin-gang.Once in operation,this intelligen

158、t computing center will become one of the largest AI computing centers in Asia,which will reduce the entry barriers to large-scale AI applications in different industries and allows the AI industry to continuously forge ahead.Facilitating the cross-border flow of foreign exchange funds is also an im

159、portant step of Lin-gang.According to Shanghai Zhizhen Intelligent Network Technology Co.,Ltd.,a company engaged in technological R&D in the AI sector,the facilitation policy of“expanding the use of capital income account”provides a alternative to the pain points of enterprises in the return of rais

160、ed funds and the use of funds by agreement-based controlled enterprises.Offering loans to non-affiliates allows domestic agreement-based controlled enterprises to use overseas financing funds in a more convenient manner.It can help enterprises transfer the raised funds back to China after going list

161、ed abroad in 2023 and use the funds for production.With the policies to support the platform construction in the AI industry and to improve the support of data,computing power,algorithms and other elements for the development of the AI industry,Lin-gang officially commenced the construction of the“D

162、ishui Lake AI Innovation Port”in August 2022.Gathering upstream and downstream enterprises in the AI industry,it plans to attract 20,000-30,000 professionals and 500 enterprises in the industry and increase the industrial scale to RMB 50 billion in three years14.More than 40 key projects in the AI i

163、ndustry had established there on the same day as the commencement of the port.These projects not only cover many popular fields such as smart chips,unmanned driving,robotics,computing power and algorithms,and digital twins,but also involve leading enterprises in many segments such as graphics engine

164、,automotive electronics and AI chips.As of July 2023,Lin-gang had established scientific and technological R&D platforms such as Lin-gang Scientific and Technological Innovation Platform for Key technologies in Intelligent Systems,new scientific and technological innovation transformation platforms

165、such as Shanghai Lingang Artificial Intelligence Lab,and computing power service platforms such as China Telecom Lin-gang Intelligent Computing Platform.It has also established 8 data centers,including SenseTimes Artificial Intelligence Data Center(AIDC),Yovole Network,and Information Flying Fish.So

166、 far,therere more than 100 enterprises engaged in AI technology in Lin-gang.14 The Administrative Committee of Lingang new Area.https:/ Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South CooperationLin-gang Special Area allows more d

167、evelopers to participate in the transformation of AI technologies that drives the development of key application fields such as intelligent plants,smart transportation and smart cities,and makes significant contributions to the construction of an AI innovative application demonstration zone with reg

168、ional features,promoting improvement and scale development of the AI industry.It also enables linkage and mutual empowerment between the AI industry and other cutting-edge industries such as integrated circuits,ICV and biomedicine so as to realize the digital transformation of the whole city.For exa

169、mple,ICV is the largest AI terminal in Lin-gang Special Area.Chapter 4-Case 2:Promoting Economic Cooperation and Integration with ASEAN15ChApTER 4.CASE 2:pROMOTING ECONOMIC COOpERATION AND INTEGRATION WITh ASEANASEAN and China are largest trading partner for each other.The trade or broader economic

170、cooperation has been strengthened through two FTA agreements:China-ASEAN FTA in 2010 and RCEP in 2022,while Chinas Pilot FTZs have offered additional impetus to this South-South regional economic partnership.4.1.Efficient Market Connectivity to Expand Trade An essential part of the Pilot FTZs polici

171、es are trade-and FDI-related,which allows more active economic integration notably with regional economies such as ASEAN.First,Pilot FTZs improve the efficiency of economic and trade exchanges between China and ASEAN economies.For example,to smooth the cross-border cargo vehicle flow in Friendship(Y

172、ouyi)Pass on the China-Vietnam border,The Chongzuo Area of Guangxi FTZ has pre-emptively formulated an anti-congestion policy to guarantee smooth cargo flows.The method includes establishing the trade center in Puzhai as a channel for agricultural products like durian.In addition,it uses a smart log

173、istics control platform to enable automatic early warning of abnormalities so that timely adjustment can be conducted.It also promotes the upgrade of the online intelligent auxiliary inspection system to realize unmanned system operations in the whole process from the entry of imported(exported)vehi

174、cles to pending inspection,docking for inspection and exit.The turnover efficiency of inspection parking spaces has been increased by 35%,greatly improving the efficiency of import and export customs clearance15.Logistics in this region have improved dramatically.In the first eight months of 2023,Ch

175、ina imported about 1.25 million tons of fruits(over 6.5 billion RMB in terms of value)such as durian and jackfruit from ASEAN countries through the Puzhai passage of Friendship(Youyi)Pass16.Second,pilot FTZs promote better integration of rules and standards to reduce the institutional costs of trade

176、 between China and other developing countries.Currently,the signing and execution of RCEP presents an important opportunity.China has taken relevant measures in the FTZs in Shanghai,Guangdong,Tianjin and Fujian,such as specifying the acceptable scope of“minor errors”in certificates of origin under p

177、referential trade agreements and promoting continuous optimization of customs clearance processes with RCEP members,including ASEAN.In November 2022,Shandong FTZ and Wanding Development Co.,Ltd.in Thailand signed a project agreement on the construction of the“ASEAN Digital Trading Platform of Agricu

178、ltural Products,”17 The two sides will build a digital trading platform(with total investment at about 500 million USD)for agricultural product transactions between China and ASEAN countries and establish an online digital integrated service platform and a system for offline warehousing and logistic

179、s in the supply chain,to reduce the cost of agricultural product trade.Once put into operation,this platform is expected to serve 100 enterprises engaged in import and export of agricultural products and to push the import and export volume of agricultural products to exceed US$1 billion each year.1

180、5 From official website of local government of Guangxi:http:/ 16 From official website of local government of Guangxi:http:/ From official website of local government of Shangdong:http:/ Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-S

181、outh CooperationThird,pilot FTZs leverage their advantages as the forerunner,actively explore and accelerate the development of new formats and new modes of foreign trade such as cross-border e-commerce,market procurement,integrated foreign trade service enterprises,bonded maintenance,offshore trade

182、 and overseas warehouses,and continuously expand the space for trade development with other developing countries.For example,Zhejiang FTZ has taken initiative to deploy overseas warehouses in ASEAN and other regions,positioning Ningbo as one of the fastest runners in cross-border e-commerce and over

183、seas warehouse development in China,which also supports the rapid development of economy and trade between Ningbo and ASEAN.In 2022,the import and export volume between Ningbo and ASEAN reached RMB 149.48 billion,up 19.6%on a year-on-year basis.18 Another example would be the Chongqing FTZ,who promo

184、tes the development of new business formats such as market procurement trade through the new land-sea channel in the west and opens new cross-border trade channels.4.2.Investment Facilitation.China has transformed its foreign investment management landscape and greatly improved the investment libera

185、lization and facilitation level to encourage more developing countries to invest and build cooperative bonds with China.Pilot FTZs have attracted more enterprises from developing countries to invest in China.China introduced the Negative List on Foreign Investment Access to Shanghai FTZ in 2013,this

186、 document has been revised 7 times,with the special management measures contained therein reduced from 190 in the first version to 27 in the 2021 version.As a result,investment access restrictions have been lifted in many industries and no restrictions are imposed in manufacturing.FTZs have also int

187、roduced more flexible foreign exchange and capital account management to offer better convenience to foreign investors.All of these measures provide an impetus for other developing countries,including ASEAN,to invest in China.Statistics show that ASEAN investment in China has continued to grow in re

188、cent years,increasing from US$7.95 billion in 2020 to US$10.58 billion in 2021,and the growth rate in 2022 reached 8.2%.19 Also,in July 2023,Qianhai&Shekou Area of Shenzhen,China(Guangdong)pilot FTZ,held the ASEAN-China Greater Bay Area Economic Cooperation(Qianhai)Forum,which intended to help ASEAN

189、 enterprises better understand and participate in the construction of the Greater Bay Area.The value of contracts signed at the forum reached RMB 12.10 billion,and the contracts covered industrial park construction,digital economy,agricultural cooperation,etc.In addition,Pilot FTZs in Guangxi and Yu

190、nnan make active use of their geographical advantages to promote cross-border industrial cooperation with Vietnam and Myanmar and to attract more enterprises from Southeast Asia and South Asia to enter the Chinese market.As of July 2023,the cumulative bilateral investment between China and ASEAN cou

191、ntries has amounted to over US$380 billion,with more than 6,500 enterprises directly invested by China established in ASEAN20.18 Ningbo Municipal Development and Reform Commission.http:/ Economic and Commercial Office of the Mission of the Peoples Republic of China to the Association of Southeast As

192、ian Nations.http:/ The State Council Information Office of China.https:/ 4-Case 2:Promoting Economic Cooperation and Integration with ASEAN174.3.Promote Industrial and Innovation Cooperation In recent years,Pilot FTZs have promoted industrial cooperation models in industrial sector through“Two Count

193、ries Twin Parks”mode,which has introduced innovative economic and trade cooperation model between China and other developing countries.“Two Countries Twin Parks”refers to a production capacity cooperation method with which two sovereign countries set up parks to pursue linkage development in each ot

194、hers territory.This model has developed rapidly in pilot FTZs.For example,the Qinzhou Port Area of the Guangxi FTZ promotes the upgrading and development of the“Two Countries Twin Parks”cooperation mechanism between China and Malaysia and continuously deepens and expands international cooperation wi

195、th ASEAN.This mechanism has expanded from Malaysia to Singapore,Indonesia,Brunei and other countries,and the scope of cooperation has expanded from ASEANs traditional specialties like edible birds nest,rubber,durian and others to finance,green chemicals,new energy materials,palm oil and secondary me

196、tals.Also,since the Chinese government approved the establishment of the China-Indonesia and China-Philippines Economic and Trade Innovation-driven Development Demonstration Parks in early 2023,the Fujian FTZ has been exploring to make a“point-to-point”policy and system breakthrough at the park leve

197、l.The goal is to make greater breakthroughs in the industrial,economic and trade cooperation of“Two Countries Twin Parks”under the support of more open and targeted policies and systems.18The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and So

198、uth-South CooperationCONCLUSIONSThis report has outlined the rationale and progress of the FTZs strategy,its role in promoting industrial transformation and Chinas engagement with the global economy,including through greater South-South cooperation.Pilot FTZs have multiple goals in which institution

199、al innovations play a vital role and have been the priority of the political leadership,considered as“important strategic measures”for Chinas further development.Through institutional innovation,China has experimented broad policy measures aiming to deepen its reform and opening up,improve governmen

200、t service and doing business environment that matches international high level standards.Pilot FTZs are not uniform,and each has a specific mission aligning with each location and regions peculiarities and competitive positioning.FTZs include a lot of investment and trade facilitation policy.By doin

201、g so,they on the one hand drive the trade and FDI in the last decade.Furthermore,through more comprehensive and innovative policy measures to support the selected industries,both modern services and advanced manufacturing sectors,FTZs have boosted Chinas industrial transformation,as we have shown in

202、 analysis and case studies.This is also a key difference of the FTZs from other development zones in China,in which preferential treatment rather than institutional innovation is the core of the policy framework.From regional perspective,Chinas Pilot FTZ also differ with industrial hubs in some othe

203、r Asian countries,such as the Republic of Korea,Singapore,Malaysia,and Vietnam.China was a latecomer to development zones compared to the Republic of Korea and Singapore,which evolved in the late 1960s,and Malaysia in the 1970s,but was a forerunner to Vietnam,which pursued industrial hubs in the ear

204、ly 1990s.These four economies all fall within the Asia-Pacific region but exhibit different contexts.Terminologies used in these countries have been context-specific and specified by particular legislation.However,no model similar to the Pilot FTZs has been used in these economies.For example,the in

205、dustrial complex was used in Korea as a general term,with industrial parks in Singapore,free trade zones in Malaysia and industrial zones in Vietnam as generic terms,while specialized industrial hubs focusing on different industries or innovation hubs have also been used.Promoting foreign investment

206、 was not a key priority in the Republic of Korea.The country relies more on domestic firms,primarily chaebols,which was the primary driver of export-led industrialization and significant investors in strategic priority industries,in both Korean and in overseas markets.Singapore has focused on buildi

207、ng the most dynamic and effective government institutionsboth promotional and regulatory agenciesand has emerged as a prominent pro-business economy.21 However,state and government-linked organizations play vital roles.22 Given its pioneering position,Singapore has excelled in services industries su

208、ch as logistics and international financial hubs.The cooperation in economic governance between China and Singapore has been profound on multiple fronts,including the reform of state-owned enterprises.Institutional innovations applied by the Pilot FTZs in Shanghai have drawn from Singapore as a sour

209、ce of best practices and international standards in opening the services sector and promoting investment and trade facilitation.Malaysia has primarily used free and export-processing zones to promote export-oriented industrialization.23 However,compared to its peers,such as Singapore and South Korea

210、,the industrial transformation and 21 Korea had 901 industrial parks comprising 40 national level,434 local level,six urban high-tech,and 421 agri-industrial parks(Oqubay,2020;Kim and Song,2020;Sonn and Kim,2020).22 Singapore has industrial parks,comprising mainly technology hubs,business hubs,and J

211、urong Petrochemical Hub(Oqubay,2020;Yeo,Giap,Yam,and Loo,2020).23 Malaysia had over 500 industrial estates of diverse sizes,of which 40 per cent were built by the government.Penang had a concentration of export processing zones(Rasiah and Krishnan,2020).The Role of Chinas Pilot Free Trade Zones in P

212、romoting Institutional Innovation,Industrial Transformation and South-South Cooperation19development of innovation capabilities have not been comparable.It has applied business-friendly policies and export facilitation for prolonged periods.Arguably,the ambition for institutional innovation were inc

213、omparable,while Malaysia has developed a business environment that meets international practices.Vietnam initiated its Doi Moi economic reforms from a centrally planned socialist economy towards a market economy later than China in 1986.24 The economic dynamism of the Pacific Rim and Chinas rise as

214、the worlds manufacturing powerhouse,and its proximity to Japan and South Korea have allowed Vietnam to benefit from having role models and established supply chains.In comparative terms,through the case study in this report that have presented evidence and insights on the role of FTZs in promoting i

215、ndustrial transformation,several quick points may help to summarize some similarities and differences between FTZs and industrial hubs in other selected Asian economies.First,both China and other Asian economies introduced various measures and reforms.For China,institutional innovation is at the hea

216、rt of Pilot FTZs including improving government services.Singapore has also introduced some similar policies in economic governance,managing foreign investment,and building a vibrant services sector(international finance,corporate services,logistics)while focusing strategically on manufacturing and

217、innovation.Second,regarding the management and promotion of FDI,the Republic of Korea has relied little on FDI,while Singapore,Malaysia,and Vietnam focused on promoting FDI.Despite the focus on the attraction of FDI,the role of SOEs has been eminent.China and the four countries pursued a development

218、 path where the state played a strategic position,but SOEs continue to play critical roles in Singapore,China,and Vietnam.At the same time,the Republic of Korea relied on the private sector,especially the chaebols.Third,the approaches showed variation in the application of development zones or indus

219、trial hubs.The Pilot FTZs were a unique development in China and catalyzed its opening and reforms.Singapore,the Republic of Korea and Malaysia dont focus very much in this regard,as they operated in a more liberalized economy from the 1960s.In summary,Chinas Pilot FTZs shared similarities with the

220、countrys previous development zones and industrial hubs in other Asian economies in terms of trade and FDI promotion,industrial development,etc,but is also distinct.FTZ particularly place institution innovation at the core of its policy framework and adopt more comprehensive framework in advancing i

221、ndustrial transformation,managing the balance of deeper integration and policy space,and reform government function and services.The overall official data from the Government and case studies presented in this paper have both shown the general positive results of FTZs in the last decade.From regiona

222、l and international perspective,Chinas FTZs can offer a reference point to other developing countries that want to strengthen integration but manage associated risks,improve government services and business environment,and upgrade industries(manufacturing and services)through encouraging innovation

223、and proper investment policies.Given China is a large economy with complex government system and differences across the provinces/cities,those 21 FTZs have different policy focus in different local context.This report only includes two cases which are still not sufficient to show the whole picture.T

224、he detailed examination and assessment of each FTZ in future studies would offer more interesting insights.24 Vietnam had 326 industrial parks distributed in 63 provinces.Most are industrial zones,with seventeen coastal economic zones and a few border gate economic zones(Tu-Anh and Anh-Tuan,2020).20

225、AppendixAppENDIX Table 1:A summary matrix of specialization of the 21 Pilot FTZsPilot FTZsYearSpecialization Phase I2013China(Shanghai)Pilot FTZ2529 September 2013International financial centre Financial services,corporate headquarters,international logistics hub,ad-vanced manufacturing,high-tech in

226、novationLogistics hub:Waigaoqiao Bonded Area,Waigaoqiao Bonded Logistics Park,Yangshan Bonded Port Area,Pudong Airport Comprehensive Bonded Area5 Areas(Waigaoqiao Bonded Area,Waigaoqiao Bonded Logistics Park,Yang-shan Bonded Port Area,Pudong Airport Comprehensive Bonded Area).Phase II2015China(Guang

227、dong)Pilot FTZ21 April 2015 Economic hub and deep cooperation with Hong Kong and MacauA new highland of modern industry and a comprehensive service hub:Nansha New District Area of GuangzhouAn experimental demonstration window for the opening up of the financial sec-tor,an important base for world tr

228、ade in services and an international hub port:Qianhai-Shekou Area of ShenzhenCulture and education opening pilot area and international business service leisure tourism base:Hengqin New District Area of Zhuhai Three Areas(Nansha New Area,Qianhai Shekou Area,Hengqin New District Area)China(Fujian)Pil

229、ot FTZ21 April 2015Trade and economic hub,with a focus on TaiwanCross-straits manufacturing and emerging industries:Xiamen Area,Advanced manufacturing base:Fuzhou Area,Tourism and trade hub across Pingtan Area,Three Areas(Pingtan Area,Xiamen Area,Fuzhou Area)China(Tianjin)Pilot FTZ21 April 2015 Mode

230、rn services and innovation hubShipping logistics,international trade,financial leasing:Tianjin Port AreaR&D and high-end manufacturing industries:Tianjin Airport AreaFinancial innovation:Binhai New District Central Business DistrictThree Areas(Tianjin Port Area,Tianjin Airport Area,Binhai New Area)P

231、hase III2017China(Liaoning)Pilot FTZ 1 April 2017Logistics hub and emerging industriesPort and shipping logistics:Dalian AreaAdvanced manufacturing:Shenyang AreaModern services and emerging industries:Yingkou AreaThree Areas(Dalian Area,Shenyang Area,Yingkou Area).25 This paper reads it as Shanghai

232、Pilot FTZ,and the same for the other Pilot FTZs,for easier reference.The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South Cooperation21Pilot FTZsYearSpecialization China(Zhejiang)Pilot FTZ1 April 2017Economic and service hubDigital

233、 economy,new AI,fintech innovation hub:Hangzhou AreaRetail and logistics hub and BRI platform:Jinyi AreaAdvanced manufacturing,R&D,services hub:Sothern Zhoushanpetrochemical trading hub:Northern Zhoushan IslandGreen petrochemical hub:Zhoushan Outlying Islands AreaInternational shipping and logistics

234、 hub:Ningbo AreaThree Areas(Zhoushan Island area,Zhoushan Island Northern Area,Zhoushan Island Southern Area)China(Henan)Pilot FTZ 1 April 2017High-tech and services hubAdvanced manufacturing and cross-border e-commerce:Zhengzhou AreaServices and creative industries hub:Kaifeng AreaR&D and high-tech

235、 manufacturing:Luoyang AreaThree Areas(Zhengzhou Area,Kaifeng Area,Luoyang Area)China(Hubei)Pilot FTZ 1 April 2017High-tech and innovation hubHigh-end and green technology:Xiangyang Area R&D and ICT services:Wuhan AreaHigh-tech and biotechnology hub:Yichang AreaThree Areas(Wuhan Area,Xiangyang Area,

236、Yichang Area)China(Chongqing)Pilot FTZ 1 April 2017Trade hub,BRI,western developmentHigh-end and emerging manufacturing:Liangjiang AreaTrade and logistics hub:Xiyong AreaMulti-modal logistics and services hub:Guoyuangang Area Three Areas(Liangjiang Area,Xiyong Area,Guoyuan Port Area)China(Sichuan)Pi

237、lot FTZ 1 April 2017Economic,technological hub and BRI beltHigh-end manufacturing,R&D,and logistics hub:Chengdu Tianfu New District AreaDistribution and logistics hub:Chengdu Qingbaijiang Railway Port AreaModern services and logistics hub:South Sichuan Port AreaThree areas(Tianfu New Area,Qingbaijia

238、ng Railway port Area,South Sichuan Lin-gang Area)China(Shanxi)Pilot FTZ1 April 2017Advanced manufacturing and agricultural hubNew technology industries and aviation logistics:Central AreaLogistics and financial hub:Xian International Port AreaAgricultural and BRI belt:Yangling Demonstration Zone Are

239、aThree Areas(Central Area,Xian International Port Area,Yangling Demonstration Area)Phase IV2018China(Hainan)Pilot FTZ or Port13 June 2018Establishing Pilot free trade zones on the whole island of Hainan;accelerating the construction of a new open economic system;accelerating the innovation and devel

240、opment of the service industry;accelerating the transformation of government functions;strengthen the establishment of major risk preven-tion and control systems and mechanisms;uphold and strengthen the partys overall leadership over the construction of the pilot free trade zone.22AppendixPilot FTZs

241、YearSpecialization Phase V2019(1)China(Shandong)Pilot FTZAugust 2019International technology and service hubInternational logistics maritime hub:Qingdao AreaHigh-tech and advanced manufacturing:Yantai AreaThree Areas(Jinan Area,Qingdao Area,Yantai Area)(2)China(Jiangsu)Pilot FTZAugust 2019Innovation

242、 and technology hubHigh-tech and international innovation:Suzhou Area International Innovation Hub:Nanjing Area Asia-Europe logistics hub and gateway:Lianyungang AreaCooperation with BRI countries Three Areas(Nanjing Area,Suzhou Area,Lianyungang Area)(3)China(Guangxi)Pilot FTZAugust 2019Manufacturin

243、g and trade hubModern services and digital economy hub:Nanning AreaInternational logistics and green technologies hub:Qinzhou Port AreaBuilding a new channel for international land and sea trade facing ASEAN Three Areas(Nanning Area,Qinzhou Port Area,Chongzuo Area)(4)China(Hebei)Pilot FTZAugust 2019

244、Manufacturing and services hubHigh-tech industries and digital economy:Xiongan AreaInternational logistics and aviation hub:Zhengding AreaMaritime and energy hub:Caofeidian AreaAviation technology and logistic hub:Daxing Airport AreaFour Areas(Xiongan Area,Zhengding Area,Caofeidian Area Daxing Airpo

245、rt Area)(5)China(Yunnan)Pilot FTZAugust 2019South and Southeast Asia regional economic hubCross-border tourism and education hub:Honghe AreaHigh-end manufacturing and services hub:Kunming AreaCross-border economic hub:Dehong AreaThree Areas(Kunming Area,Honghe Area,Dehong Area)(6)China(Heilongjiang)

246、Pilot FTZAugust 2019Advanced economic hubEmerging industries and technological hub:Harbin AreaCross-border economic hub:Heihe AreaEnergy and trading hub:Suifenhe AreaThree Areas(Harbin Area,Heihe Area,Suifenhe Area)Phase VI2020China(Beijing)Pilot FTZ21 September 2020Innovation-driven economy and int

247、ernational business hubR&D and cutting-edge innovations:Scientific Innovation AreaBusiness services,international finance,Culture creativity Biotechnology:High-end Industries AreaDigital trade,Cultural trade,Business exhibition,Medical industry:International Business Services Area(airport economy)Th

248、ree Areas(the Science and Technology Innovation Area,the International Business Service Area,the high-end industrial Area)The Role of Chinas Pilot Free Trade Zones in Promoting Institutional Innovation,Industrial Transformation and South-South Cooperation23Pilot FTZsYearSpecialization China(Hunan)Pi

249、lot FTZ21 September 2020Inland economic and logistics,Africa-China cooperation hubAdvanced manufacturing hub:Changsha AreaLogistics hub:Yueyang AreaHeavy industries and logistics hub:Chenzhou AreaThree Areas(Changsha area,Yueyang Area,Chenzhou Area)China(Anhui)Pilot FTZ21 September 2020Advanced manu

250、facturing hubHigh-end manufacturing:Hefei AreaAdvanced and emerging technology hub:Wuhu AreaNew and rare materials manufacturing hub:Bengbu AreaThree Areas(Hefei Area,Wuhu Area,Bengbu Area)Source:State Council and MOFCOM24AppendixTable 2:Taxonomy of Chinese development zonesTypologyTotal no.FocusNat

251、ional-level development zonesSpecial economic zones(SEZs)526An initial experiment of opening up and reform,focusing on at-tracting foreign investment.Pioneering market reform mechanisms were adopted in these SEZs.It offered innovations,learning,and the confidence to pursue opening up and reforms.Nat

252、ional economic and technological develop-ment zones(ETDZs)23027It was initiated in 1984 to develop the manufacturing,technologi-cal,and export sectors.They are primarily concentrated in Eastern and Central China.A primary driver in Chinas rise as the manufacturing powerhouse.National high-tech indus

253、trial development zones(HTDZs)17728It was initiated in 1988 to develop science,innovation,technology and high-tech industries.They are mainly concentrated in larger cities and the Eastern and coastal regions.New area development(NEP)1929High-quality urban development.It was implemented in selected c

254、ities and is expected to scale up widely.Comprehensive Bonded Zones（CBZs（15630Facilitate customs process and exports.Distinct types are included in this taxonomy,including export pro-cessing zones,bonded zones,and free zones.A significant focus has been on the facilitation of trade and reforming cus

255、toms.Cross-border economic cooperation zones(BECZ)1931Facilitate border cooperation Pilot free trade zones(FTZs)2132Launched in 2013,these focus on institutional innovation and deepening opening up and reform.Sub-total 627Source:UNCTAD compilation from sources(Ministry of Commerce,Ministry of Scienc

256、e and Technology,and other publications).26 Data Sources:https:/ Data sources:https:/ Data sources:http:/ Data Sources:https:/ Data sources:http:/ Include 17 border economic cooperation zones.Data sources:https:/ Data sources:https:/ Role of Chinas Pilot Free Trade Zones in Promoting Institutional I

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