Together with the deepening of globalization and economic integration, trade and investment liberalization has played more important role in economic cooperation. Besides the free trade agreements among member countries, free trade zone is also considered to establish a favorable environment in order to attract foreign investment and promote economic growth of the areas laying inside and outside the zone. On the basis of economic reforming and trade liberalization initiative, China approved the establishment of Shanghai Pilot free trade zone on September 29th, 2013. The Shanghai Pilot free trade zone is the experiment area of the whole country’s national economic transition process. For the first time, many new policies and management mode were adopted in this area to examine their performance and usability. This study aims to analyze the policy’s effect of Shanghai pilot free trade zone on Shanghai economic growth. By using counter-factual method, the study compares the difference of Shanghai GDP in counter-factual scenario from the actual scenario and figures out the policy effect with the existence of the free trade zone. Therefore, the finding emphasizes the strong effect of Shanghai free trade zone on its economic growth. Understanding the economic effect of Shanghai pilot free trade zone is necessary to further up investment and trade liberalization in China.
The Shanghai Pilot Free Trade Zone (or the “FTZ”) is located in the Pudong New Area of Shanghai, is the first free trade zone in Chinese mainland. The Shanghai FTZ was approved by China’s State Council on 22 August 2013 and was officially launched on 29 September 2013. The Shanghai FTZ covers an area of 28.78 square kilometer and comprises the four existing customs supervisory zones, including Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistic park, Yangshan Bonded Port and Pudong Airport Comprehensive Bonded Zone. In 2014, it was expanded by incorporating Lujiazui Financial Area, Jinqiao Export Processing Zone, and Zhangjiang High Tech Park, expanding the area of the Free Trade Zone from 28.78 square kilometers to 120.72 square kilometer. The FTZ is expected to facilitate open trade anchored in liberalized provisions on foreign exchange management, tax policies, and customs supervision [
The establishment of the Shanghai FTZ, as part of the national strategy of more proactively opening up China, is a big step forward in the country’s desire to adapt to new global economic trends and trade developments. The Shanghai FTZ implemented various reforms in term of policies and logistics to facilitate the free movement of goods at the regional level. With the implementation of regulatory procedures simplification, business costs reduction and large tariff-free zone, the Shanghai FTZ aimed to further open up the service industry, provide a flexible environment for foreign exchange and off-shore financial services, dramatically reduce the transaction costs of firms, and ease other regulations. The Shanghai FTZ adopted “frontline, completely liberalized” processes and reform the current practice of declaring goods before these enter the trade area as well as reduce the trading barrier with favor tariff policy and convenient administrative procedures. One highlight of the Shanghai FTZ is the adaption of the negative list system in investment management. This list includes specific projects what are not open to foreign investment or are of restricted access, otherwise are fully open to foreign investment. It is expected that Shanghai FTZ will not only encourage foreign investment investing to provide a wide range of value-added services but will also make ports as centers of commodity flow, capital flow, and information flow.
Taking shanghai free trade zone as policy reform experimental site, the State Council decided on December 28, 2014 to introduce the practices of Shanghai FTZ nationwide and later on, in April, 2015, there were three new Free Trade Zones were opened in Guangdong, Tianjin and Fujian that shared many of the features with the Shanghai FTZ, for example: the same negative list, the same registration procedure and many other common features [
The Shanghai free trade pilot zone has been established for almost 4 years and continuously completes its institutional innovation by carrying out the negative list management mode for market access, deepening foreign investment, overseas investment management and commercial system reform. At the end of 2016, there are 61 “centralized registration offices” have been set up; there are 21,400 enterprises have registered in the Zone. The procedure of registration was also simplified through launching online booking, preregistration services and trial mobile phone APP for “handheld appointment.” The registration time was shortened by 2/3. At the end of 2016, there were totally 79,669 enterprises operating inside the Zone, including 62,365 domestic funded enterprises, involving registered capital of 4140.362 billion yuan and 17,304 foreign-funded enterprises, involving registered capital of 243.686 billion US dollars.
In order to deepen trade facilitation, Shanghai FTZ promotes the customs clearance reform namely “three interdependence”, including information exchange, supervision mutual recognition and law enforcement mutual assistance as well as introduce a trial customs clearance integration system, namely “three automations one concentration” that refer to automatic tax declaration, automatic customs clearance, automatic audit and concentrative inspection. There were 5155 customs debentures were made in 2016, in value of 6983 billion yuan, contributing 1204 billion yuan taxation with a year-on-year growth of 7.5 times, 3.0 times and 3.1 times respectively. In 2016, the total import and export trading volume was 783.68 billion yuan, rising by 5.9%, of which the export volume was 231.585 billion yuan, rising by 14.5% in comparison with last year (see
On financial aspect, the financial system innovation framework was basically formed with the opening of Shanghai Insurance Exchange, Shanghai Stock Exchange, China Trust Registration Co., Ltd. and the expanding of qualified companies on international wholesale trading platform. At the end of 2016, the scale of RMB cross-border transactions continuously expanded the total cross border RMB settlement hit 1151.8 billion yuan, total revenue of cross-border bilateral RMB capital pool was 352.213 billion yuan.
Regarding supervision and management, the FTZ promoted the implementation of middle and later supervision platform on both area and municipal level, opened up enterprise credit information publicity system, formed the in-the event and after-the event regulatory system for the core purpose of government function transformation.
With the development of Shanghai FTZ and the expanding of free trade zone