Where is China’s free trade port most likely to land?

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Wang Yang, member of the Central Political Bureau Standing Committee and vice premier of the State Council, published his signed article “Promoting a New Pattern of Full Opening.” The full text of more than 6400 words, from the opening up of the situation, connotation and initiatives several aspects of its detailed explanation, a great amount of information. Among these, the most widely discussed issue is “exploring the construction of a free trade port.”

People’s Daily put down the public number “Knight Island” said, pay attention will know that this is actually echoes of the 19 report. On the 18th of October 18th, Xi Jinping explicitly pointed out that it is necessary to promote the formation of a new pattern of full liberalization, “give more freedom to reform the free trade pilot zone and explore the establishment of a free trade port.”

Free trade area, we often listen, but free trade port is what? Why is it so important in the pattern of opening to the outside world? Where will it fall?

The goal of free port conjecture: Shanghai benchmark Hong Kong, Singapore?

Author: Chen Guo, Essence Securities chief strategist, original title “free trade port, open a new round of New Heights”, the text reflects the views only of the research and academic point of view, do not represent the position of knowledge and does not constitute investment advice.

Opening to the outside world is both a secret weapon for China to participate in global division of labor and cooperation and to integrate into the world economy to achieve rapid economic growth. It is also an effective means of promoting the reform and absorbing advanced overseas experience through opening up. The current world pattern, the background of the world foreign trade and the beginning of the reform and opening up have undergone major changes. China’s new round of policy of opening to the outside world is under way and is expected to upgrade one of the most important engines of China’s rapid economic growth.

1. Internal Needs and External Pressure: One of the Double Motives for a New Round of Opening to the Outside World

(1) Foreign trade has made great contributions to China’s economy and has always been one of the most important engines of China’s economy

China, as a very large economy, has more foreign trade dependence than other large economies. In 2006, China’s import and export accounted for as much as 64% of the GDP of that year. Even though the degree of dependence on foreign trade has dropped to 33% by 2016, it remains one of the most important engines for China’s economy. China’s huge industrial output of manufactured goods and a sound industrial chain have given China a great deal of flexibility in foreign trade. The recovery of global demand may bring tremendous impetus to the Chinese economy.
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(2) China needs to build a new heights open to the outside world

In order to promote foreign trade, China has set up the first bonded zone since 1990: Shanghai Waigaoqiao Free Trade Zone. Since 1990, China’s import and export has increased by nearly 43 times. In recent years, there have been only a few remaining open bonuses brought by China’s accession to the WTO. However, China has not taken a big step toward “relaxing market access, opening up the service sector to the outside world and protecting the legitimate rights and interests of foreign investment,” and so on. The next stage is to create new Of the opening up to the outside world, and actively explore the new path of opening up has become a reasonable policy option in our country.

At the same time, the Doha Round of the WTO has ended in failure. Multilateral free trade agreements such as the TPP have started to emerge and continue to impact the WTO’s dominance in world trade. Our exploration of accelerating a new round of opening up to the outside world will also help to meet the requirements of the world’s high-level opening agreement as soon as possible and take precautions well to prepare for the decline of the WTO’s influence.
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(3) Pressure from other countries to promote our country’s opening up

Considering the national security, the strategic industry and the actual development level of our country, China applied for a 15-year protection period when it joined the WTO and restricted foreign investment in the fields of finance, automobiles and telecommunications. For products such as agricultural products and television programs Quotas are still being implemented. Since the degree of opening up in these strategic areas and service industries has never been satisfactory to foreign countries, these countries, especially the United States and the European Union, have also continuously exerted pressure on our country to continue promoting the opening up. Because of his own philosophy, U.S. President Trump paid special attention to balancing the trade deficit with China. Not long after taking office, Trump sought to pursue the “Hundred Days Plan” for economic cooperation between China and the United States and seek cooperation in such fields as agriculture, energy and financial services. For example, China liberalized its imports of U.S. beef in agriculture and the United States allowed imports from China Cooked poultry meat. In the financial sector, China promised to open a series of U.S. services to credit rating, cross-border settlement, electronic payment, banking and bond settlement, especially to the financial industry.

2. Freeport: a new highland for China’s opening to the outside world

1.2.1. Proposed Freeport: Free Trade Area Version 3.0

The introduction of the free port policy is not a sudden but an inevitable result of the continuous deepening of pilot free trade zones. Two months after the Shanghai Free Trade Zone of China, China’s first free trade pilot zone, was listed in September 2013, the concept of free port of trade at the Third Plenary Session of the 18th CPC Central Committee on “Deepening the Reform on Certain Major Issues” It has been proposed that a number of eligible places should be chosen for the development of free trade park (Hong Kong) based on the promotion of existing pilot projects.

In the “Plan for Further Deepening the Reform and Opening up of the China (Shanghai) Pilot Free Trade Zone” issued by the State Council in March this year, it was proposed that a free trade port should be established within the special customs control zones such as Yangshan Bonded Port Area and Shanghai Pudong Airport Bonded Area . This is version 3.0 of the Shanghai FTZ. The development of the FTZ has opened a new chapter.
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1.2.2. Freeport Objectives: Shanghai benchmarking Hong Kong, Singapore

As the “leading geese” in the “1 + 3 + 7” “geese” in the free trade area of ​​China, the latest requirement of the State Council is the “three districts and one fort”: the integration of opening up and innovation Pilot zones for reform and opening up, risk and stress testing areas for open economy, priority areas for enhancing government governance capacity, and serving as a bridgehead for the nation’s development of the ‘One Belt and One Road’ and promoting the market participants’ going out.

According to the “Comprehensively Deepening the Reform and Opening-up Plan of the China (Shanghai) Pilot Free Trade Zone” issued by the end of March this year, the State Council’s requirement for free port in Shanghai is that “the benchmark international highest level”, we expect the Shanghai Free Trade Zone , Building the free trade zone with the highest degree of openness. In the recent half a century, the free ports of China such as Hong Kong, Singapore, Port of Dubai and Port of Cologne, Panama, have relied on their own unique geographical advantages to constantly improve their trade facilitation measures and create a relaxed and free trade development environment to realize the rise of the city. It is expected that the Shanghai Freeport will be based in Hong Kong and Singapore as a teacher: first off-shore trade and offshore finance. Offshore business is the biggest difference between the Freeport and Free Trade Zones.

3. Freeport’s policy outlook:

“Four freedoms” is the focal point

In free port, “freedom” is the soul of its existence. We can find in the assessment of the current policies of Shanghai, Hong Kong and Singapore from the thesis of the group of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce that Shanghai is currently in the field of trade liberalization and investment The open areas have obtained 4.1 and 3.8 points, which are close to those of Hong Kong and Singapore. However, there is still room for improvement in areas such as financial liberalization and freedom of movement for free people.

Taking into account the current published policy documents and the policy intention of the Central Government in setting up a free port, we predict that the main focus of the “free port” policy lies in the “four freedoms”:

Trade freedom: to achieve “open the front line, second line safe and effective control” (“Customs retreat” to the second line, the free port within the “territory of customs.”). “Let it go” is to change from the conventional regulation to the precision regulation. According to the current regulatory framework, all goods entering the Free Trade Zone must be declared, and under the framework of precision supervision, effective supervision systems and mechanisms are set up for key risk matters mainly through the means of risk classification of goods and credit classification of enterprises. Expected to explore the measures are: first-line unconditional access, registration for the record, exemption area exemption from trial; the implementation of third-party acquisition of letters and even multi-lingual letter; the use of qualified assumptions, non-intrusive monitoring; big data analysis based on the negative list and Focus on regulatory targets.

Freedom of Establishment: The negative list of foreign investment will be reduced to the maximum extent. The new round of opening up is expected to be concentrated in areas such as professional services such as financial services, telecommunications, Internet, culture, heritage, maintenance and shipping services and advanced manufacturing industries. Some key industries have liberalized the restrictions on the proportion of foreign investment. More efficient in business registration, registration conditions more relaxed, but more intervention in business day-to-day management.

Financial Freedom: Favorable Investment, Financing and Exchanges. Safeguarding the free flow of funds across borders is the basis for developing offshore financial business. Shanghai Freeport is expected to explore a freer investment and financing exchange rate system, promote capital account convertibility pilot projects and establish a RMB global service system in line with the construction of Shanghai’s international financial center.

Freedom of movement: The strict restrictions on entry visas and employment of foreigners are expected to ease, providing a favorable environment for the free flow of talent. It is expected that the foreigners’ work permit system for entering China and the personnel visa system will become the focus of the policy. Foreign high-level personnel participating in the innovation and entrepreneurship will enjoy the convenience of staying and moving abroad.

4. Freeland landing city forecast:

Top in Shanghai, Ningbo – Zhoushan and Shenzhen probability

Which cities in China are expected to receive free port policy? We have made a comprehensive assessment of the possibility of obtaining free ports in all cities based on the port infrastructure, the policy foundation and the current position. First of all, the busy port is the basis for the development of foreign trade and various offshore businesses in the free port. Therefore, we will have a precondition for using a large container terminal as a free port to sort the domestic ports according to the container throughput from January to September this year. Shenzhen, Ningbo-Zhoushan and other cities. Secondly, the Pilot Free Trade Area or the Comprehensive Free Trade Zone is now the necessary policy basis for becoming a free trade port. Several ports in the top are more satisfied with this condition. Finally, by analyzing the relevant The official’s position analyzes the certainty and progress of these cities in building a free port.

Based on the above analysis results, we can conclude that Shanghai Freeport is the most settled place and that Ningbo-Zhoushan and Shenzhen have a greater probability of integrating the urban development and the development of the FTZ.

Shanghai: Shanghai has formed a preliminary plan for a free port. Under the guidance of the relevant state departments, Shanghai plans to further refine and perfect the plan. Shanghai is the first free trade zone in China. The first free trade zone is located at the highest level of openness and has always been at the forefront of opening up to the outside world. Port conditions, the first three quarters of this year’s container throughput of nearly 30 million TEUs. Since the free trade port was approved in March this year, up to now, Shanghai has been the only region that has substantially started the construction of a free trade port and has been set as the free trade port with the highest degree of openness. Han Zheng, former secretary of the Shanghai Municipal Party Committee, said on October 19 that Shanghai was planning to establish a free trade port in accordance with the plan of the Central Government.

Ningbo – Zhoushan: focus on power, positioning clear. In contrast with the decentralization of FTA in some provinces, Zhejiang’s FTA is concentrated in Ningbo-Zhoushan Port. Its positioning is also very clear. It focuses on oil storage and transit and enhances the allocation of oil resources. The strategic position of oil in national security has also laid the strategic significance of Zhejiang Free Trade Zone. From the perspective of port strength, Ningbo-Zhoushan is the world’s largest port: cargo throughput exceeded 900 million tons in 2016, becoming the world’s first “900-million-ton” port and this year it is expected to become the first port in the world to have exceeded 1 billion tons in throughput . Ministry of Commerce spokesman peak said: Zhejiang Free Trade Zone has initially established a free trade zone pilot zone development goals, docking the international standards to promote the oil as the core of the trade liberalization of commodities.

Shenzhen: Shenzhen is a wonderful example of reform and opening up. It is currently one of the most dynamic cities in China’s economy. It can be regarded as the best example of reform and opening up. As a new starting point for the 40th anniversary of the reform and opening up, Shenzhen is the core of Guangdong, Hong Kong, city. Adjacent to Hong Kong, Macao and Hong Kong have comprehensive strengths. We also expect Shenzhen to have a greater possibility of developing a free port to promote the integration of Greater Tai Wan District.

Other: Guangzhou, Dalian and Xiamen also have the possibility of developing a free port. Local governments have strong wills.

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