Shanghai Party chief: FTZ to serve national reform

On Sept 22, the experiment of Shanghai's Pilot Free Trade Zone marked its first anniversary.

And one week later, on Sept 29, Shanghai Party Chief Han Zheng reflected on what the FTZ has accomplished and where it must go.

"FTZ is to explore new systems, not preferential policies. FTZ is to serve the national reform, not Shanghai's interest. FTZ is a nursery of new measures that can be transplanted in the country, not a showcase potted landscape," he said in a group interview with Chinese media.

Some analysts do not think the Shanghai FTZ has fulfilled the central government's high expectations. Some key posts in charge of making decisions on financial reform, a core task of the FTZ, have seen several new faces, despite the Shanghai government's denial that these are normal personnel changes.

Han listed the FTZ's achievements in four areas: the implementation of a "negative list" model; the efficient operation of new trade supervisory institutions make trade easier; the starting of financial reform experiments on capital account convertibility and financial services; and the cutting of red tape in administration.

"These are all important contents needed in China's reform and opening up in the future, as well as the job we urgently need to do according to the requirements of the international conventional practices and international trade and investment rules," Han said.

President Xi Jinping and Premier Li Keqiang pay special attention to the institutional innovations in the FTZ, and encourage Shanghai's authorities to make breakthroughs with pioneering spirit and wisdom.

Han said FTZ's work in the past year has strictly followed the requirements of the central authority. 'The new measures in governance, business finance and trade pioneered by the FTZ can boost the efficiency of the economy, stimulate the vitality of the market, and lower the operational costs of enterprises," he said.

These are in line with the principles of China's reform measures, which stress playing up the market's decisive roles in distributing resources.

So far, Shanghai's FTZ has contributed 21 new items for national use; six are in investment administration, nine in trade supervision and six in financial innovation, Han noted.

"Whenever FTZ succeeds in implementing a new system, FTZ will report it to the central authority for assessment, and approval. Another batch of more than 30 items of new measures is under assessment of the relevant central departments now," Han said.

In response to the critics of the FTZ, Han said: "Our understanding on FTZ's importance in innovation one year ago was far lower and shallower than today. The central authority has high requirements for the extension and depth of FTZ reform."

Han said one big difficulty in the FTZ's exploration is the innovation of governance models, or the reform of the government.

"We thought the government reform is to delegate more power to the market. But whenever we meet problems in the process, we will habitually strengthen the government control and power. The government reform became a cycle game with government as the game rule maker," Han said. "We did not walk out of the old mindset until the FTZ reform imposes the challenge to us," Han added.

"The 'negative list' model clearly marks the border of government power and tells us what to do," Han said. The FTZ cut the bans and restrictions on its "negative list" from 190s items to 139 items, and Han said the list will continue to be shortened.

"The government's main responsibility is to manage and control risks, and maintain fair market orders," Han stressed.

He also clearly showed his hope for the central authority that the FTZ needs more coordinated effort and support from relevant central ministries and departments.

"In the past one year, without the direction and support from the relevant ministries and departments, Shanghai FTZ cannot break the bottlenecks in creating many new institutions," Han said.

He said he hoped the central ministries and departments can continue to make joint efforts with the Shanghai government through efficient communication and cooperation to help the FTZ achieve more breakthroughs in key areas of reforms.

"Some reforms in the FTZ need supporting reforms in many fields outside the FTZ at first, which entails more support from relevant central authorities," Han pointed out.

Han showed his sense of urgency for the FTZ's heavy to-do lists in three years, a deadline the central government has set for the FTZ.

One year has passed. The FTZ has just started some sporadic reforms, mostly in the second half of this year, and remains far from establishing the institutional system that can be transplanted across the country. The deadline to realize reforms in 60 key areas is 2020, as the central authority decided one year ago.

"The three years set aside to Shanghai FTZ's experiment is a long time in the remaining time before 2020," Han said. "We must pressure ourselves further to race with the time."