New free trade zones expected to counter sluggish growth

China has approved plans to build three new free trade zones (FTZs) in Guangdong, Tianjin, and Fujian, as well as proposals to deepen reforms in the Shanghai FTZ, the Xinhua News Agency reported on Tuesday, adding to the fervor for reforms in the world's second-largest economy.

The approval was given by the Political Bureau of the Communist Party of China Central Committee at a meeting on Tuesday. No details were provided.

The decision to create the three new FTZs, modeled after the Shanghai FTZ, was announced by the State Council, the country's cabinet, in December 2014.

The three new zones are expected to introduce innovations consistent with local conditions, the cabinet said in a statement, without elaborating.

The geographic composition of the three new FTZs was mapped out at the end of 2014 when the National People's Congress (NPC) Standing Committee passed a resolution to ease investment rules in the three new FTZs and areas added to the existing FTZ in Shanghai.

The Guangdong FTZ will cover 116.2 square kilometers, the Tianjin FTZ 119.9 square kilometers, and the Fujian FTZ 118.04 square kilometers.

The Shanghai FTZ, officially launched in September 2013 and covering 28.78 square kilometers, will be adding 91.94 square kilometers for a total area of 120.72 square kilometers.

The previous experience suggests unveiling the plans would not be immediately available.

The overall plan for developing the Shanghai FTZ, which was officially approved on July 3, 2013, was not made publicly available until September 27, 2013, two days prior to its official establishment.

All the four FTZs are poised to adopt the same list of restricted and prohibited projects, which is being drawn up by the National Development and Reform Commission, the country's top economic planner, China Business News reported on Tuesday.

A shorter list will be adopted in the FTZs, meaning more freedom will be granted to investors under the investment guidelines, Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, a Beijing-based think tank, told the Global Times on Tuesday.

Following Premier Li Keqiang's earlier call to streamline governance and delegate power in his government work report, Xu believes another list will also be drafted for the FTZs to define and limit government's authority to regulate the market.

Efforts to push for the expansion of FTZs are considered crucial in stimulating growth in the Chinese economy which is seeing signs of slackening.

The approval of three new free trade zones will serve to counter the slackening growth of the economy, Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Tuesday.

He noted that the Tianjin FTZ will help drive investments and trade in Tianjin as well as nearby places in North China's Hebei Province, the Guangdong FTZ will benefit not only Guangdong but also neighboring provinces, and the Fujian FTZ is expected to strengthen trade links between the Chinese mainland and Taiwan.

The Shanghai FTZ has gained useful and successful experiences in terms of financial liberalization and trade facilitation, which can be adopted by the three new zones, said Bai.

Data from the Shanghai Customs showed in January that trade generated from the FTZ reached 762.4 billion yuan ($122.8 billion) in 2014, accounting for 26.6 percent of total trade in Shanghai.

There is still room for the growth in trade at the Shanghai FTZ, as more policies are expected to further open up the investment climate in the zone, said Bai.

In the latest sign of headwinds facing the economy, China's flash Purchasing Managers' Index was released by HSBC on Tuesday to have fallen to an 11-month-low of 49.2 in March.

A reading above 50 indicates an expansion in manufacturing, while a reading below 50 points shows a contraction.

In addition to the three new FTZs, the central government is expected to approve more FTZs in the western and central regions of the country to boost growth in the hinterlands, both experts said.

Central China's Hubei and Henan provinces, Northwest China's Shaanxi and Gansu provinces, South China's Guangxi Zhuang Autonomous Region, East China's Shandong Province, and Liaoning Province in Northeast China have expressed interest in applying for FTZs in their local government work reports for 2015.