China: FTZs and policy implications for liberalisation via a Free Trade Agreement

The purpose of this paper is to offer discussion points towards assessing how, using a Negative List approach, market-opening for financial and related professional services can be developed to maximum effect within the SFTZ – or indeed any other similar FTZ.

The paper takes a twofold starting point: first, that market-opening – within a rules-based framework and subject to adequate regulation – is desirable in itself; and, secondly, that an environment such as the SFTZ provides potentially important opportunities for testing market-opening approaches before applying them more widely across China’s domestic market.

In sectoral terms, the scope of the paper is limited to financial and related professional services. This partly reflects the area of expertise of TheCityUK’s Liberalisation of Trade in Services (LOTIS ) Committee’s membership, as the paper’s authors. There are however other advantages in tackling these services sectors together as a group:

  • They are services at the heart of market development, in terms of finance and financial instruments, risk management, mobilisation of personal savings, contractual business practices and corporate transparency; 
  • Given these features, they act as a driver of economic development as a whole, providing the mechanisms and linkages for optimising trade in goods and services, and the tools needed for financing and developing new businesses and enhancing new business opportunities; 
  • They are highly regulated services, with similar regulatory needs and challenges; 
  • They include services at the heart of today’s globalised world economy, with interdependent networks relying on global reach and global standards; and 
  • There is a growing requirement for regulatory coherence through cooperation between regulators of these services sectors in different jurisdictions.

 

There are therefore sound policy reasons for taking a coherent approach towards this set of important services. Moreover, the policy choices involved in doing so will also carry resonances for the approach to be taken towards a wider range of internationally traded services (e.g. telecommunications and logistics), all the more so because, as recent studies have shown, trade in services and trade in goods are now intimately linked through “servicification” of value chains.

Key discussion points

  • Determine the extent of China’s market-openness (much of it resulting from China’s WTO accession in 2001) and what are the categories of liberalisation measures and practical steps that could be envisaged in the SFTZ as a pathfinder for liberalisation through an FTA 
  • Consider how far the SFTZ Negative List approach could be replicated in the negotiation and implementation of an FTA.

 

You can also download this report in Chinese.