《中國(guó)自貿(mào)試驗(yàn)區(qū)在促進(jìn)制度創(chuàng)新、產(chǎn)業(yè)轉(zhuǎn)型和南南合作中的作用》

TheRoleofChina’sPilotFree TradeZonesinPromoting

InstitutionalInnovation,

IndustrialTransformationand

South-SouthCooperation

TheRoleofChina’sPilotFree TradeZonesinPromoting

InstitutionalInnovation,

IndustrialTransformationand

South-SouthCooperation

Geneva,2023

?2023,UnitedNations

Thisworkisavailablethroughopenaccess,bycomplyingwiththeCreativeCommonslicencecreatedforintergovernmentalorganizations,at/licenses/by/3.0/igo/.

Thefindings,interpretationsandconclusionsexpressedhereinarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheUnitedNationsoritsofficialsorMemberStates.

ThedesignationsemployedandthepresentationofmaterialonanymapinthisworkdonotimplytheexpressionofanyopinionwhatsoeveronthepartoftheUnitedNationsconcerningthelegalstatusofanycountry,territory,cityorareaorofitsauthorities,orconcerningthedelimitationofitsfrontiersorboundaries.

MentionofanyfirmorlicensedprocessdoesnotimplytheendorsementoftheUnitedNations.Photocopiesandreproductionsofexcerptsareallowedwithpropercredits.

Thispublicationhasnotbeenformallyedited.

UnitedNationspublicationissuedbytheUnitedNationsConferenceonTradeandDevelopment

UNCTAD/GDS/2023/5

eISBN:978-92-1-358616-7

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

ACKNOWLEDGEMENTS

ThispublicationwaspreparedunderthesupervisionofRichardKozul-Wright,DirectoroftheUNCTADDivisiononGlobalizationandDevelopmentStrategies(DGDS).DaweiWang(UNCTADDivisiononGlobalizationandDevelopmentStrategies)coordinatedtheresearchandcollaboratedonthedraftingofthereporttext.ThereportteamappreciatesthesubstantivecommentsreceivedfromAndrésMiguelRondónAnzolaandAnidaYupariAguadoofUNCTAD.

UNCTADgratefullyacknowledgesthesubstantivecontributionstothedrafttextfromAkebeOqubay(SOASUniversityofLondon)andDanZhang(CAITEC).TheteamthanksCarterDoughertyforcopy-editingandFlorenceHudryforadministrativesupportandformattingthepublication.

ThefundingsupportreceivedbyUNCTADfromtheGovernmentofChinafortheconductofresearchisappreciated.

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

FOREWORD

ThepaceandbreadthofChina`seconomicintegration,structuraltransformationandreductioninpovertyoverthelastfourdecadesisunprecedented.Amongthemultiplefactorsthathavedriventhisachievement,China’seconomicpolicyformulationiscriticaltounderstandingitssuccess.China’sreformandopeningupbeganwithaseriesofpolicyexperimentsinboththeurbanandruralareas,withthemoresuccessfuloutcomesextendedandthelesssorevisitedorabandonedaltogether,anapproachwhichhasbeenreplicatedacrosssectorsandoversubsequentdecades.

Experimentalismandpragmatism,twobasicfeaturesofChina’seconomicpolicyformulation,havebeenfullyintegratedinthecountry’sPilotFreeTradeZones(FTZs)strategy,whichstartedfromShanghaiin2013,againstthebackgroundoftheGlobalFinancialCrisis.SincethefirstFTZinShanghai,thenumberofzoneshasexpandedto21.Despitetheirtitle,thescopeofChina’sFTZgoesfarbeyondtrade(andinvestment)promotiontoincludeavarietyofpolicydimensions;governmentfunctionsandservices,manufacturingsectorupgrading,servicessectoropening,financialdeepening,skillsdevelopmentandgreencitydevelopment.South-SouthCooperationandmanyothershaveallbeenintroducedintothose21FTZsfor“experimentation”.Consequently,institutionalinnovationisdefinedastheessenceoftheFTZsstrategy.

Thispublicationaimstodiscussthegenesis,featuresandperformanceoftheFTZsstrategy.ItalsopresentscomparativeanalysisbetweenFTZsandotherspecialeconomiczonesinothereconomiesintheregion.Furthermore,thevolumeexaminestheroleofFTZsinpromotinglocalSDGprogress,industrialdevelopment,andSouth-Southcooperationthroughthreecasestudies.

TheresearchhasbeenfundedbytheChineseGovernmentattheoccasionofthe10thAnniversaryofthecountriesFTZsstrategy.

RichardKozul-Wright

Director

DivisiononGlobalizationandDevelopmentStrategies

UnitedNationsConferenceonTradeandDevelopment

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

TABLEOFCONTENTS

Introduction 1

Chapter1.ChinesePilotFTZs:backgroundandfeatures 3

Chapter2.PilotFTZsandChineseeconomiccatch-up 7

Figure1:Annualinflowofforeigndirectinvestment(FDI)toChinafrom2013to2022

(inbillionUS$atcurrentprice) 8

Figure2:Exportsingoodsbetween2013and2022(inbillionUS$atcurrentprice) 8

Figure3:Exportsinservicesbetween2013and2022(inbillionUS$atcurrentprice) 9

Chapter3.Case1:DevelopmentofAIIndustryinLin-gangSpecialAreaofShanghaiFTZ 11

Chapter4.Case2:PromotingEconomicCooperationandIntegrationwithASEAN 15

Conclusions 18

Appendix 20

Table1:Asummarymatrixofspecializationofthe21PilotFTZs 20

Table2:TaxonomyofChinesedevelopmentzones 24

Selectedreferences 25

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

LISTOFFIGURES,TABLES,ANDABBREVIATIONS

ListofFigures

Figure1:Annualinflowofforeigndirectinvestment(FDI)toChinafrom2012to2022(inbillionUS$)

Figure2:ValueofexportofgoodsfromChinabetween2012and2022(inbillionUS$)

Figure3:Exportsinservicesbetween2013and2022(inbillionUS$atcurrentprice)

ListofTables

Table1:Asummarymatrixofspecializationofthe21PilotFTZs

Table2:TaxonomyofChineseindustrialhubs(2023)

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

LISTOFABBREVIATIONS

AfCFTA

AfricanContinentalFreeTradeArea

ASEAN

AssociationofSoutheastAsianNations

BRI

BeltandRoadInitiative

CBECZs

Cross-BorderEconomicCooperationDevelopmentZones,China

CBZs

ComprehensiveBondedZones(China)

COMTRADE

UnitedNationsComtradedatabase

ETDZs

EconomicandTechnologicalDevelopmentZones(China)

FDI

ForeignDirectInvestment

FIAS

Multi-DonorInvestmentClimateAdvisoryServiceoftheWorldBankGroup

FTZ

Free-TradeZone

GATT

GeneralAgreementonTariffsandTrade,UnitedNations

GDP

GrossDomesticProduct

HIDZs

High-TechIndustriesDevelopmentZones(China)

MOFCOM

MinistryofCommerce,China

NDRC

NationalDevelopmentandReformCommission,China

R&D

ResearchandDevelopment

RCEP

RegionalComprehensiveEconomicPartnership

SEZs

SpecialEconomicZones

UNCTAD

UnitedNationsConferenceonTradeandDevelopment

US$

USDollar

WCO

WorldCustomsOrganisation

WIPO

WorldIntellectualPropertyOrganisation

WTO

WorldTradeOrganisation

Yuan,RMB

Chinesecurrency

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

INTRODUCTION

Developmentis,atitscore,atransformationalprocess,combiningaseriesofinteractiveandcumulativelinkagestocreateavirtuouscycleofincreasedresourcemobilization,fastercapitalaccumulation,greateremployment,higherincomes,expandingmarkets,andmoreinvestment(UNCTAD,2016).Fordevelopingcountries,integrationwithneighbouringeconomiesandbeyondisessential,providingaccesstonewmarkets,investmentopportunitiesandmoreadvancedtechnologies,includingmostrecentlythroughparticipationinglobalandregionalvaluechains.Butintegrationisalsoassociatedwithrisksandisnotautomaticallytranslatedintoproductivitygrowthandstructuraltransformation.

Developingcountrieshenceneedappropriatestrategiestomanageintegrationandthepolicyspacetoensurethattheybenefitfromtheintegrationprocess.Butwhatexactly?Theanswersvaryacrosscountriesanddevelopmentstagesanddependonaconstantlychangingglobalcontext.Aone-size-fits-allsolutiondoesnotexist.Instead,policymakersneedtolearn,explore,test,andadjusttoevolvingcircumstances.China’sPilotFreeTradeZones(FTZs)areonesuchexperiment.

TheGlobalFinancialCrisis(GFC)shockedtheworldeconomyprofoundlyin2008-2009andleftalastingimpact.From2005-2010,theaverageannualgrowthratefordevelopingandadvancedeconomieswere6.57%and0.77%,respectively.Butfortheperiodof2010-2015,annualaveragegrowthofdevelopingregiondroppedto5.37%,anddevelopedcountriessawanincreaseto1.64%.Fortheperiodof2015-2020,theratesfellfurtherto3.43%(developingcountries)and1.19%(developedcountries).FDIflowsandtradegrowthrateswerealsosluggish.GlobalFDIhasneverreturnedtopre-GFClevel.

ChinaintroduceditsPilotFTZsinSeptember2013,aspartofitsresponsetotheexternaluncertaintiestriggeredbytheGFC,toexplorenewwaystodeepenChina’sreformandopeningup1.Sincethen,Chinahasestablished21FTZsinvolving51cities.

Fromaglobalperspective,FTZs,ontheonehand,areanalogoustospecialeconomiczones(SEZs).SEZscarryvaryingnamesintherespectivecountries’legislation(suchasindustrialhubs,export-processingzones,industrialparks,andinnovationhubs,etc.),butallaimtofacilitateindustrialactivitythroughfiscalandregulatoryincentivesandinfrastructuresupportisacommonfeature(UNCTAD,2019).

But,ontheotherhand,FTZsarealsodistinctfromtypicalSEZs.ThecorefunctionofFTZisinstitutionalinnovationtoimprovegovernmentservice,expandintegration(notablyintheservicessector),advancereformandencouragetechnologyR&Dforindustrialtransformationthroughpolicytestsandexperiments.

Inthelastdecade,the21pilotFTZshavecatalyzedChina’sdevelopmentstrategiesupdate,deepereconomicintegration,tradeandFDIpromotion,andindustrialhigh-qualitydevelopment.AccordingtotheMinistryofCommerce(MOFCOM)2,regardinginstitutionalinnovation,Chinahasimplementedover3,400“pilotreformassignments”in21FTZsandhasreplicated302institutionalinnovationsatnationallevel;intermsoffacilitatingindustrialtransformation,FTZs,throughreformsintrade,investment,financial,scienceandtechnologypolicies,havepromoted“highqualityindustrialagglomerationdevelopment”;regardingtheservicessector,FTZshavealsosupporteddevelopmentoffinancialandshippingservices.In2022,coveringlessthan0.4%oflandspace,FTZscontributed18.1%ofFDIinflowand18.1%ofimportsandexportsofChina.AlongthestronggrowthoftradeandFDIinFTZs,themakeupofChineseexportshasshiftedtowardstechnologicallyintensegoods,suchaselectrical,computer,vehiclesandmachinery,highlightingtheadvancesintechnologicalcapability.FTZshavealsoreinforcedChina’seconomiccooperationandintegrationwithotherregionaldevelopingeconomiesparticularlywithASEAN

1NotificationfromtheStateCouncilonOverallProgrammeofChina(Shanghai)PilotFreeTradeZone.

https://www.

/zwgk/2013-09/27/content_2496147.htm

2StatementsfromMOFCOM,MinistryofTransportation,andStateAdministrationofForeignExchange,inthepressconferenceofStateInformationOfficeon28thSeptember2023

/zhengce/202309/

content_6906861.htm

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

members(South-SouthCooperation),whichthereforehascreatedthesynergieswiththecountry’sintegrationinitiativessuchasRegionalComprehensiveEconomicPartnership(RCEP),ASEAN-ChinaFreeTradeAgreement(ACFTA),andCloserEconomicPartnershipArrangements(CEPA),etc.

ThisreportfirstlyaimstoprovideempiricalevidenceonthegenesisofChinesepilotFTZs,theirrationale,purposes,thenexaminetheroleofFTZsinpromotingChina’sindustrialtransformationandexternaleconomicrelations,throughcasestudies.ThecomparativeinsightsbetweenFTZsand1)China’sotherdevelopmentzonessuchasEconomicandTechnologicalDevelopmentZones(ETDZs)andHighTechIndustrialDevelopmentZones(HIDZs);2)industrialhubsinotherAsianeconomies(SouthKorea,Singapore,Malaysia,andVietnam)willalsobebrieflydiscussed.

Thereportwillbeorganizedasfollows:Chapter1willreviewthebackground,nature,andgovernanceofPilotFTZs,whichisfollowedbyChapter2focusingonChinesePilotFTZsandeconomiccatch-up.Chapter3analyzestheeffectofFTZinadvancingindustrialdevelopment,usingtheexampleofAIindustryinShanghaiFTZ(Lin-gangSpecialArea).Chapter4presentsacaseontheroleofFTZsinpromotingChina’seconomiccooperationandintegrationwithASEANeconomies(South-SouthCooperation),andtheconcludingsectionpresentskeyfindings,abriefcomparisonwiththeindustrialhubsinotherAsianeconomies,andsuggestionsforfutureresearch.

3

Chapter1-ChinesePilotFTZs:backgroundandfeatures

ChApTER1.

ChINESEpILOTFTZS:

BACKGROUNDANDFEATURES

1.1.Backgroundandprogress

ThefirstPilotFTZinShanghaiwasestablishedinSeptember2013,whentheworldwasrecoveringfromtheGlobalFinancialCrisis(GFC)butwasstillstrugglingtoreturntoastrongandsustainedgrowthpath(UNCTAD,2013).Internationaltradeingoodsandservicesdidnotresumetherapidgrowthoftheyearsprecedingthecrisis.FDIsawasharpdeclineof18%in2012,followingthreeconsecutiveyearsofweakgrowthaftertheGFC.

AslowingworldeconomicgrowthwithexportmarketcontractionpresentedchallengesforChinaaswell.China’sgrowthwassupportedbyalargestimuluspackageaftertheGFC,andremainedabove9%from2008-2011,butdroppedtobelow8%in2012.Inresponsetotheexternaluncertaintiesanddomesticchallengesincludingover-capacityinsomesectors,foodsecurity,risingdebtlevels,structuralunemployment,andenvironmentaldegradation,theChinesegovernmentidentifiedthreekeydimensionsforitseconomicpolicies,namely“stabilizinggrowth,transformingstructure,andadvancingreform”.LaunchingthePilotFTZinitiativewaspartofthestrategytoexploreeffectivewaystobolstereconomicgrowththroughdeepeningeconomicreform.

Againstsuchbackground,thefirstFTZdirective,MasterplanofChina’sPilotFreeTradeZone(Shanghai),wasissuedbytheStateCouncilon18September2013.SincetheinceptionofthefirstFTZinShanghai,Chinahasestablishedatotalof21PilotFTZs:inGuangdong,Tianjin,andFujianin2015;in2017,anexpansiontoregionsincentralandwesternpartsofChina,includingLiaoning,Henan,Hubei,Chongqing,Sichuan,ShaanxiandZhejiang.In2018cameHainan.Thenin2019,ChinaapprovedtheestablishmentofPilotFTZsinShandong,Jiangsu,Guangxi,Hebei,Yunnan,andHeilongjiang.In2020,thelatestbatchofFTZswereapprovedinBeijing,Hunan,andAnhui.ThoseFTZsinvolve51citiesin21provincesincludingtheentireHainanIsland.(seetable1intheappendix)

Duringthisprocess,theChinesegovernmentestablishedagoverningmechanismnamedJointMeetingMechanismofInterMinistriesontheWorkofPilotFTZs(JointMechanism)undertheStateCouncil.Around30ministriesoragenciesatnationallevelareincludedinthisJointMechanismincludingMOFCOM,NationalDevelopmentandReformCommission(NDRC),MinistryofFinance(MOF),People’sBankofChina(PBC),GeneralAdministrationofCustoms,andtheStateAdministrationforMarketRegulation,etc.MOFCOMplaysacoordinatingroleintheJointMechanismthroughitsspecificDepartmentonFTZscoordination.Atthelocallevel,provincialormunicipalgovernmentsareresponsiblefortheimplementationanddevelopmentofrespectiveFTZs.SuchgovernancestructureindicateshighervitalityandsensitivityofFTZsthanthatofotherdevelopmentzonesinChina.Incontrast,ETDZsandHIDZsfalldirectlyunderMOFCOMandtheMinistryofScienceandTechnology,respectively,nottheStateCouncil.

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

1.2.Broadgoals,experimentalapproachandlocalspecificities

Overarchinggoals

Despitethename“freetrade”,thepolicyscopeofFTZsisverywide,beyondjusttradepolicies.IntheMasterPlanofShanghaiFTZissuedbytheStateCouncil,theoverallmissionofShanghaiFTZswasexploring“newways”and“newexperience”fordeepeningreformandopeningupofChineseeconomy.Throughinstitutionalandpolicyinnovationandexperimentation,FTZsaimtoachievebroadergoalscombiningpolicyinnovationandscalingup.Table1summarizesthosekeyfeaturesofallPilotFTZs.

First,thegovernmenthasrecognizedtheneedforreformingandimprovinggovernmentservicestomatchinternationalmarketeconomystandardsforsupportingeconomicandbusinessdevelopment,whichareessentialforaninternationallycompetitiveeconomy.Institutionalinnovationwasanchoredinbenchmarkingthebestpracticesandinternationalstandards.Andtherehasbeenincreasingemphasisontheselectedpilotedinstitutionalinnovationsbasedonscalabilityandreplicability,acriticalaspectofpolicylearning.

Secondly,Chinaalsorealizesthatitneedstofurtheradvanceitsindustrialtransformationandupgrading,includingattractinginvestment,talent,andtechnology,bothforeignanddomestically,intohigh-techindustriesandR&Dtofosteraninnovation-driveneconomy.

Thirdly,inresponsetothesluggishglobaltradeandFDIgrowthsincetheGFC,ChinahaslookedtotestvariouspolicieswithrespecttoFDIandservicessectors,includingthepre-establishmenttreatment,negativelistmanagementapproach,reformingmanagementofexchangerateregime,furtheropening-upofservicessectorssuchasfinancialservices,insuranceservices,transportationservices,andotherbusinessservices.

Localspecificities

Inadditiontothesomewhatcommonframeworkofinstitutionalinnovations,allPilotFTZshaveregionalspecializationsbasedonaprovince’scompetitivepositioning.Identifyingthepeculiaritiesoflocalconditionsandpositioningonregionaladvantagesandpeculiaritieshasbeenemphasized.Assuch,the21pilotFTZsarenotidenticalandarenotbasedongenericprescriptions.Table1summarizesthekeylocalfeaturesofeachFTZs.

Forexample,ShanghaiFTZfocusesonitsstatusasaninternationalandglobalfinancialandlogisticalhub,includingtheregionalheadquartersofleadingmultinationalcorporations,comparabletoHongKongandSingapore,anditsinnovationandtechnologicalleadershipstrength.TheHunanPilotFTZfocusesonChina-AfricaeconomicrelationsandtheGuangdong-Hunanregionaleconomiccorridor.YunnanandGuangxiPilotFTZhasconcentratedoncross-bordereconomiccooperationwithneighboringASEANcountries.Successhasbeenuneven,andarangeoffactorsshapeoutcomes.AcomparativeperspectiveofthePilotFTZsisvitaltoensurethatlessonsarelearntfromallPilotFTZs,includingfailed,partiallysuccessfulandsuccessfulones.Bothsuccessandfailurearepresentinallpolicydesignandimplementationphases.Therefore,thisreport,undertakestwocasestudiesonthepolicyframeworkandeffectsofFTZsinShanghai(Lin-gangSpecialArea)onAIindustry,andseveralFTZssuchasGuangxioneconomiccooperationwithASEANeconomies.

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Chapter1-ChinesePilotFTZs:backgroundandfeatures

1.3.PilotFTZsandotherdevelopmentzonesinChina

ThepilotFTZsinitiativefollows,tosomeextent,fourdecadesofexperienceandknowledgeofusingdevelopmentzonesasaprimarytoolforopeningandreform,butalsodifferfromotherzonesinseveralaspects.

Developmentzoneswerepartoftheoriginalindustrialpolicyframeworkandinvolvedsignificantpolicylearningthroughpilotingandphasingin.China’seconomicopeningupprocessstartedfromtheestablishmentoffourspecialeconomiczones(SEZs)inShenzhen,Zhuhai,Shantou(threeinGuangdongProvince)andXiamen(oneinFujianProvince)in1979.Laterin1988,HainanProvincebecamethefifthSEZ.Intheearlystage,thefocusoftheSEZswastoattractFDItobuildprocessingtradeandaccumulateexportrevenues.ThefiveSEZshadhistoricalconnectionswithneighboringHongKong,Macau,andTaiwanProvinceofChina,whichwerenewlyindustrialeconomieswithcapital,technology,marketnetworkandmanagementexperiences.EstablishingSEZsweresoonprovenaverysuccessfulpolicydecision,particularlyinShenzhen,whichgavetheChineseleadershiptheconfidencetoexpanddevelopmentzonesfurther.In1984,14coastalcities(suchasTianjinandGuangzhou)wereidentifiedas“openingupcities,”whichallowedthemtoadopteconomicpoliciestointegrateinglobalmarkets,thoughwithlesspreferentialpoliciesthanthefourSEZs.

IntheChineseeconomicpolicycontext,SEZsspecificallyreferthefivecities/province,whichnormallycoverawholecityorevenlargerarea.Chinadidn’tbuildmoreSEZsafterHainanbuthasestablishedsmallersizedevelopmentzonessuchas“economicandtechnologicaldevelopmentzones”(ETDZs)and“high-techindustrialdevelopmentzones”(HTDZs)acrossthecountry.

NationalETDZswereinitiallyestablishedincoastalcitiesandlaterincentralandwesternChina.Bymid-2023,over230ETDZsspearheadedChina’semergenceasamanufacturingandexportpowerhouse.ThefocusonETDZshasmaturedsince2012,whichhasshiftedfromexpansiontowardsindustrialupgradinganddevelopingthetechnologicalintensityofindustries.ProvincialandcityadministrationshaveplayedadecisiveroleinexpandingETDZs,andabout2,000provincial-leveldevelopmentzoneshavebeencreated.

In1988,thegovernmentlaunchednationalhigh-techindustrialdevelopmentzones(HIDZs)inselectedcities,suchasBeijingandShanghai,withbetterinfrastructureandanetworkofresearchinstitutionsanduniversities.Thesegraduallyexpandedatthenationallevel.In2023,179high-techparksfocusedondevelopinginnovationandtechnologicalcapability,nurturingtalent,andofferingaworld-classinfrastructureandinnovationecosystem.Anadditional23indigenousinnovationdemonstrationzoneswerebuilttoboostlocalinnovation.Inthegovernment’s14thFive-YearPlan,atargetof50newhigh-techzoneswastobemadebetween2020and2025.

InadditiontoETDZsandHTDZs,whichwereresponsibleforthelion’sshareofChina’sproductivetransformation,diversetypesofdevelopmentzonesweredevelopedtoaddressspecificchallengesandgoals,includingthebondedareaandexport-processingzonesfocusingonimprovingcustomsandlogistics,primarilywithinexistingETDZs.ThenewareadevelopmentandPilotFTZswereintroducedinthe2010s(Table2).3

Fromthestart,Chinesedevelopmentzonessharedacommonfoundationandfeatures(seeTable2).Allzonesservedtheoverallopeningupandreformstrategyandindustrialpolicyframeworkalignedwithspecificstagesofdevelopment.4Five-yearplansandlonger-termdevelopmentstrategiesoutlinedtheseplans.Focusingonindustrialtransformationandtechnologicalcapability,theattractionofproductiveinvestment,exportgrowthandthecompetitivenessoftheoveralleconomyhasguidedalldevelopmentzonestoprovidetherequiredindustrialecosystem.Beyondthefunctionofpromotingeconomicintegration

3SeeLin,Xu,Xia(2020);KuoandZhang(2020);Yin(2020);ZhengandAggarwal(2020).

4SeeOqubay,Cramer,Chang,andKozul-wright(2020)fortheoreticalunderpinningsandempiricalevidenceonindustrialpolicy.

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TheRoleofChina’sPilotFreeTradeZonesinPromotingInstitutionalInnovation,IndustrialTransformationandSouth-SouthCooperation

andindustrialcapacitybuilding,theimprovementofgovernancesystemswerealsoparttothepurposeofthosedevelopmentzonesandweresupportedbywell-designedexperimentsandaphasedapproachtoallowexperienceacquisition.Acomplexsetofgovernancesystemsandpolicytoolswereused,includingdirectivesfromtheStateCouncilandministries.Second,

TheintroductionofPilotFTZscertainlyfollowedthegenerallysuccessfullessonsfromChina’spracticeofdevelopmentzones.ButestablishingtheFTZswasnotanendperse,whichmayundertakeabroaderandmoresignificantmissionthanpreviousdevelopmentzonessuchasETDZsandHTDZs.

First,theaimwastoimprovegovernancesystemsandeconomicgovernancethroughcontinuousinstitutionalinnovations.Forexample,inthepolicyframeworkofShanghaiFTZ,thefirst“taskandmeasure”istransforminggovernmentfunctionandreforminggovernmentserviceapproach,includingenhancinginter-agencycoordinating,improvingadministrationtransparency,buildinginformationplatform.Thepolicyframeworkemphasizedthegovernmentfunctionshouldtransformedfrom“pre-approval”centeredapproachtomonitoring-regulatingcenteredapproach.InQingdaoFTZ,digitaltechnologiessuchasAIandbigdatahavebeenappliedtoestablishasmartenterpriseregistrationsystem.Itisenvisagedthatthiswilldrivemuchmoretransparent,efficientandconvenientgovernmentservicewhichisessentialforsustainedeconomicgrowthandintegrationintotheworldeconomy.

Second,thePilotFTZsaimtoaccelerateindustrialupgradingthroughtheshifttowardsaninnovation-driveneconomy,advancinginnovationandR&Dcapacity,anddevelopinghigh-techindustries.PromotingFDIandimprovingtradefacilitationmanagementforthispurposehavealsobeenincludedintheplanofmanyFTZs.ThislookedsimilartothepurposeofETDZsorthefiveChineseSEZs.IndustrialdevelopmentandupgradingarethesharedfeaturefortheETDZsandFTZs.ButforETDZs,oneofthekeyapproachesistofacilitateChina’sparticipationintheGlobal/RegionalValueChainsthroughforexampleprocessingtrade(Zhang,et.al,2022).Therefore,FDIpromotionbasedonpreferentialtreatmentisakeyfeatureofmanyETDZs.WhilefortheFTZs,thefocusisusingmorecomprehensiveandinnovativepolicymeasures