China’s great reform of 1978 was made possible through the creation of special economic zones (SEZs) throughout the nation. By the mid 1980s China had created 20 such zones. Within each special economic zone, regulations such as taxation were drastically cut while these zones also welcomed foreign direct investment on highly attractive terms. The zones also served as China’s first foray into the free trade that increasingly defines Chinese mentality to a modern multilateral approach to globalisation with Chinese characteristics. Finally, because China’s special economic zones were and remain bedrocks of export driven commerce, these zones helped to transform China into the world’s industrial powerhouse that it is today.
Just as sure as the SEZs of the Deng era helped to transform all of China into the industrial and innovation powerhouse it is today, the creation of new free trade zones (FTZs) throughout strategic regions of China will help to transition the country into its next economic phase a a nation that opens its national doors to a world of trade, capital exchange, technical exchange and human connectivity.
The current development of the wide reaching Hainan FTZ looks to turn the island into a zone with virtually no trade barriers. Hainan will soon become a place where the world can come and sell its good to China while those interested in the latest Chinese innovations can take advantage of a totally open trading system. According to a recent official report form Xinhua,
“In developing the Hainan FTZ, a major step that demonstrates China’s resolution to further open up and promote economic globalization, the island will be granted more autonomy to reform, and speed up the fostering of a law-based, international, and convenient business environment as well as a fair, open, unified, and efficient market environment, according to the plan issued by the State Council.
Hainan should be positioned as a pilot zone for comprehensively deepening reform and opening up, a display of the country’s ecological civilization, an international tourism and consumption center and a zone offering services and support for the country’s major strategies, according to the plan.
Efforts should be made to pursue a more proactive strategy of opening up, accelerate the establishment of new institutions of the open economy, make new ground in pursuing opening up on all fronts, and build Hainan into a key gateway to the Pacific and Indian Oceans”.
As China looks to cultivate free trade agreements with multiple nations and in so doing helping to harmonise the ease of moving goods in multiple directions within the context of the Belt and Road initiative, China seeks not only to embrace free trade but to promote it as a means of accelerating economic growth among its partner nations by allowing them to both buy and sell their goods to important global markets in a less bureaucratically restrictive environment. As freer capital inflow and outflow arrangements will also be possible in the new FTZs, China will present the world a preview of future decades when an inevitably freely floating Renminbi will become ever more favoured as an international reverse currency and as a currency of international trade.
While China is opening up its entire geographical space to freer trade, by following the time tested method of setting up special zones to test both domestic attitudes and international attitudes towards the next phase in China’s economic development, Beijing continues to embrace a gradualist strategy that allows for the growing pains inherent in any new economic change to mature in a self-contained environment that can be easily monitored and legislatively amended depending on what challenges arise. It was this method that helped the SEZs of the 1980s transform the entire nation and thus when the new FTZs are fully operational, this too can be seen as a blueprint for future trading relations between all of China and its global partners.
Speaking of the opportunities that FTZs can help to transform into real life beneficial situations, President Xi said the following during a speech on FTZs from the 25th of October,
“The international and domestic environment has undergone extensive and profound changes in the new era, presenting the reform and opening-up with new circumstances, tasks and challenges. To seize opportunities and counter challenges, the key is upholding the banner of reform and opening-up in the new era, and continuously deepen reform and expand opening-up in a comprehensive way”.
Xi further discussed how measures to harmonise trade and make the most of economic openness can help future generations to lead more fulfilled lives. Regarding this the Chinese President stated,
“No one should be left alone on the road toward poverty alleviation and a moderate prosperous society. The mission should be fulfilled through work of generation by generation….
…We should stay true to our founding mission of reform and opening-up, draw on successful experiences in the past 40 years and raise quality and level of opening-up and reform. “We should be people-oriented. People’s happiness should be the criteria for evaluating the result of opening-up and reform. The fruits of opening-up and reform should benefit the general public”.
Thus, in the same way that Deng’s opening up in 1978 helped to empower the people and put them on a path to a more materially fulfilling and socially enlightened future, Xi Jinping Thought on Socialism With Chinese Characteristics for a New Era looks to inspire future generations of globally minded innovators to put China at the heart of a world guided by the forces of peace through prosperity. At the core of Xi Jinping Thought is the principle that economic openness when managed effectively while simultaneously encouraging people driven innovation, can help to free people from cycles of economic exploitation and ensure a future in which development progresses on a sustainable model. This itself helps ensure a more stable economic future for the world as a whole as China looks to lead by example rather than through coercion. This serves to underscore the importance of mutual respect and transparency which helps developing nations to empower their own populations through participation in the Belt and Road initiative.
Furthermore, because the market socialist model of modern China prioritises balance between innovation and regulations that avoid boom and bust cycles, China is able to offer the world a viable and sustainable alternative to neo-liberal economic systems in which automation and the artificial intelligence revolution threatens the economic opportunities of ordinary people. When contrasted with the “race to the bottom” implicit in neo-liberal economic systems, the Chinese model at the core of Xi Jinping Thought allows for the wealth generated by the artificial hand to cycle back into the economy in the same way as profits generated by the human hand have been in the past. In this sense, China’s world renowned innovations in robotics and artificial intelligence will help to further enlighten the Chinese workforce while fostering a spirit of creation and innovation that does not come at the expense of socio-economic security. The FTZs are set to be a global showcase of this balanced modern model in action.
China likewise welcomes the creation of FTZs in its partner nations as such an arrangement will help to increase global connectivity projects within the framework of the Belt and Road initiative. In an age when the fate of one nation’s stock markets and one nation’s currency can have negative ramifications throughout the world, it is clear that the best way to overcome financial unilateralism is to pool the strengths of multiple economic powers acting in concert to create new means of material, cultural and human exchange. In achieving this, China has developed a model of economic openness that can harness the kinetic potential of multiple world economies so as to achieve win-win trading relationships that are more shielded from the pangs of distant markets.
The classic adage ‘show, don’t tell’, naturally applies to the new FTZs. While theoretical arguments can win minds, seeing theory spring to action can win real life adherents whose attraction to a new geo-economic mentality is best apprehended by seeing how such a system functions in daily life. In this sense, while the FTZs will be showcases of China’s latest innovations, China’s free trading zones will be a demonstrable example of the kind of future China seeks for itself and graciously recommends for partners who may be indecisive about their own future in an ever more inter-connected world.