Beijing’s plan to set up a high-level Pilot Free Trade Zone (FTZ) will enhance the city’s technology- and services-driven sectors, as China is aiming to further open up and pursue high-quality development, analysts said on Sunday after Beijing officials announced the plan.
The plan, which features technology innovation, services trade and the digital economy, is different from other FTZs such as the Hainan Free Trade Port and the Shanghai FTZ, and it will be an example for the country to boost its services sector and narrow the country’s trade deficit in the sector.
The new FTZ will further open up the services sector and feature a negative list for cross-border trade and preferential tax policies to appeal to international capital and talent, Beijing Mayor Chen Jining said at a conference of the China International Fair for Trade in Services, which is being held in the city.
“The scale and level of services and technology businesses in Beijing is one of a kind, and its FTZ will be different from other zones, like the one in Hainan,” Tian Yun, vice director of the Beijing Economic Operation Association told the Global Times, adding that the FTZ will mainly focus on services trade instead of traditional trade, and it will officially take shape during the 14th Five-Year Plan (2020-25) period.
Beijing has one of the most robust services sectors in China, accounting for one-fifth of the national services industry market. Last year, 83.5 percent of Beijing’s GDP was generated by the sector.
The city began its trial to expand the services industry in 2015, and from 2015 to 2019, Beijing’s services sector received a total of $76.2 billion of foreign capital, with total foreign trade in services nearing 1.1 trillion yuan ($160 billion yuan).
“As an example, the city’s northwestern Haidian District is one of the most technology-intensive areas in the city, with about 140,000 registered technology companies and 39 unicorns,” Tian said. “These companies don’t usually export tangible products instead they sell a wide range of business solutions to the rest of the world.”
The FTZ will take full advantage of the strong industrial base and talent pool in Beijing, especially after years of development in the Zhongguancun area, where many Chinese technology bellwethers are based, Xu Hongcai, deputy director of the Economic Policy Commission at the China Association of Policy Science, told the Global Times.
“The establishment of an FTZ, which means a better business environment for high technology and services businesses, will also facilitate stronger communication among top Chinese companies, such as Tencent and Alibaba, and the best technology companies from the rest of world,” Xu said.
A high-level FTZ will help digitalize existing industries and unleash their potential, such as bringing traditional retailing to e-commerce, Xu added.
From January to July, imports on Beijing’s cross-border e-commerce platforms increased 55 percent year-on-year, and imports of bonded products through e-commerce jumped more than 120-fold, according to the Beijing Municipal Commerce Bureau.
According to Tian, instead of simply attracting foreign investment or luring more foreign companies, Beijing will provide an environment that appeals to international talent and encourages companies to offer world-class solutions to their global clients.
Beijing also has some of the most supportive policies in technology innovation in the country, such as big data and blockchain, Tian said. In June, Beijing introduced a blueprint for the blockchain industry that aims to establish a blockchain center by 2022.
Despite the rapid growth, China’s services sector still faces a huge trade deficit, even though the deficit has been decreasing. In the first half of 2020, the services trade deficit stood at 401.71 billion yuan, a 46.1 percent decrease year-on-year, while merchandise trade saw a 1.19 trillion yuan surplus.
“The narrowing trade deficit is driven by the export of knowledge-intensive services,” Xu said. “With the establishment of the Beijing FTZ, China’s services exports will be boosted and the deficit will further narrow.”
For the FTZ to have and maintain its appeal to top talent and companies in technology, Beijing will also have to ensure strong protection for intellectual property rights and data privacy, Tian said.
Photo taken on Sept. 4, 2020 shows the night view of the main venue and exhibition areas of the 2020 China International Fair for Trade in Services (CIFTIS) in Beijing, capital of China. The CIFTIS runs on Sept. 4-9 in Beijing. (Xinhua/Meng Jing)
