On October 16, the Chinese State Council rolled out a plan for establishing its southern island province of Hainan as a pilot free trade zone (FTZ). The plan proposes that the whole island of Hainan will be built as a free trade port. The land mass of the Hainan Island is 35,400km2, and the 11 domestic free trade zones that have been approved before are all 120km2. The area of Hainan Free Trade Zone is 26 times the total area approved for the Free Trade Zone. It is also the only free trade port to be built in the country. After the introduction of the plan, Hainan will undoubtedly be a hot spot for China's regional development; it will also support China's Belt and Road Initiative and strategically answer the South China Sea issue.
During an Anbound's internal discussion, some researchers proposed looking at this matter from an alternative perspective, that although utilizing free trade zones to expand the opening up is an international practice, what China does is continuously expanding and increasing free trade zones and part with the mentality of managing Special Economic Zones (SEZs) in the past.
SEZs are a major innovation in China's reform and opening up; the most successful SEZ is, of course, Shenzhen. Through China's nearly 40 years of opening up, this small fishing village adjacent to Hong Kong has transformed into a modern megacity with a city economy of RMB 2.2 trillion and is catching up with Hong Kong. Without exaggeration, one can say that the development of the Shenzhen SEZ has a benchmarking significance even not only in China but in the whole world as well. This is a successful example of emerging market countries using special policies to achieve extraordinary development in local areas through special means.
Looking from the history of reforms in China, the significance of the SEZs to China is far more than creating a small number of modern cities through special policies it is also about stimulating the enthusiasm of reform, opening up, and economic development throughout China, and has become an incentive for local economic development. These SEZs have also significantly enhanced the confidence of the Chinese Communist Party and the Chinese government in developing the economy, and have accumulated valuable practical experience for China's development. Therefore, even to this day, the establishment of various SEZs to seek development breakthroughs has also become a model and path that the Chinese government departments often refer to when making economic decisions.
However, looking from a longer time frame, these SEZs are actually a product of a certain period in history. The essence of an SEZ is utilizing special policies to carry out certain measures in a given space. In other words, the development of the SEZs relies on policy differences. The difference in resources has caused different resource allocation and distinct human resources, which has led to a special kind of development. However, SEZs that have greatly contributed to the history are facing a very different development environment since China entered the WTO 17 years ago, and this is the China that has been deeply involved in globalization. Today, a higher level of openness has become a developmental need, and the implementation of true national treatment has become a major trend. In this new era, if China still maintains such SEZ mentality, and only focuses on policy differences, China would merely adhere to an outdated development idea.
Anbound scholars' long-term observations show that the enthusiasm of various SEZ policies in many places in China is not as strong as before, but certain places are still quite keen in such policies; one of the reasons is regional differences. Due to the large differences in regional development in China, outdated experience in developed regions can be also attractive to underdeveloped regions. In addition, another important factor is that due to institutional reasons, China's economic development space is largely derived from policies and central authority. As market-oriented reforms are still incomplete, the forces of marketization and the rule of law cannot fully dominate China's domestic development; hence policies are relied upon. Strictly speaking, this kind of developmental thought is, in fact, abnormal, and it is not suitable for the international trend under globalization.
If the SEZ mentality is no longer suitable for the development situation, what should the future development rely on? Which factors should be valued? According to Anbound research team, the era of special policies for SEZs is over; it is now time to use the geographical advantage to share the market and common development. It should be emphasized that the biggest difference between the geographical advantage and the SEZ advantage is that the SEZ advantage is a closed one, which means that it relies on special policies in the closed area to achieve development, while the geographical advantage is inherently open and has geographical conveniences that complement each other, while sharing important elements with each other, and forms collaboration to jointly create and share the markets to achieve common development.
On geographical advantages, Anbound research team believes that the Greater Bay Area that integrates Guangdong, Hong Kong, and Macao is more reliable than the Hainan Free Trade Zone. Parts of Shanghai, Jiangsu, and Zhejiang in the Yangtze River Delta region also rely on geographical advantages to achieve common development through the division of labor and cooperation. If these regions can be reformed and break the institutional and administrative regional restrictions, it is entirely possible to develop a "world-class Greater Bay Area" and an "improved Yangtze River Delta region." As long as China has survived the painful period of global trade friction and anti-globalization, the country can usher in a new development period that relies on geographical advantages and the expansion of the domestic market.
Final analysis conclusion:
The SEZ mentality is no longer suitable for China's current participation in the development of globalization. China has entered a new era of utilizing geographical advantages to share the market and achieve co-development.
