Government think tank: Mistakes allowed in FTZ trials

The China (Shanghai) Pilot Free Trade Zone (FTZ) should be allowed to make mistakes as it carries out experimental policies, said Long Guoqiang, a senior researcher with a Chinese government think tank, on Wednesday. The Shanghai FTZ paves the way for "upgrading China's economy," a concept championed by Premier Li Keqiang, said Long of the State Council's Development Research Center. Long asked for tolerance and patience for the FTZ, a month-old testing bed for reforms. The zone will open up broader space in markets for foreign investors, including in the service and financial sectors, and covers approximately 29 square kilometers in four areas of Shanghai, China's financial hub. It got the nod from the central government in July, and was formally unveiled on Sept. 29. "We should not be afraid of making mistakes in the FTZ. When problems occur, we solve them and then improve our policies. That is the reason why we need pilot zones," said Long. The Shanghai FTZ has adopted a "negative list" approach identifying industries with bans or restrictions on foreign investment. The Shanghai municipal government published a list of over 1,000 banned and restricted areas, which include gambling, pornography, weaponry, media, investment banks and insurance. Some investors complained that the list is too long. However, Long noted that since China is new to the negative list approach, it is natural to have a relatively long list. "We have implemented the 'positive list' approach, which relies on tight control, for decades. It is not easy to roll out a brief negative list overnight, as every item on the list demands careful consideration," Long added. However, the use of the negative list embodies a "revolutionary" change in ideas for governance, and is conducive to unleashing innovative spirit and vitality in the market, Long said. The list of restrictions planned for the Shanghai FTZ is preliminary and will continue to be shortened, Shanghai's mayor Yang Xiong said in a press conference Monday. Meanwhile, Long stressed that the Shanghai FTZ is not a competitor to Hong Kong. Shanghai is tilted toward the domestic market, while Hong Kong stands as an international financial hub. The two face no direct competition, said Long. As the Shanghai FTZ spearheads a new round of reforms in China, Hong Kong will gain more opportunities for development, he added. Long also said that the central government should draw up an overall plan to specify the roles of different regions during China's new reforms. However, there is no need to chart out a timetable for launching more FTZs. Local media recently reported that the provinces of Guangdong and Hubei and the municipality of Tianjin are waiting in line to apply for their own FTZs.