Recently, people close to the matter confirmed the submission of Tianjin’s application to the Central Government for a Free Trade Zone (FTZ). This comes one year after the launch of the Shanghai FTZ and has the market excited about what an FTZ might mean for the city and also if Tianjin might follow the Shanghai FTZ model. However, the Shanghai FTZ has had mixed results thus far and is still in the pilot stage. It may be too early to conclude that copying the Shanghai model will lead to successful outcomes in Tianjin.

The Shanghai FTZ is focused on service sector reforms including trade, investment, finance and government administration. The majority of the reforms in the Shanghai FTZ will first focus on finance, such as policies that have been put forth on interest rate liberalisation and RMB convertibility.

Since the reforms in the Shanghai FTZ have been slow to materialise, Tianjin may instead want to structure its FTZ to focus on enhancing the competitiveness of industries already present or planned for the area. The most recent master plan for the Tianjin FTZ encompasses nearly 65 sq km, including Tianjin Port, Dongjiang Port and Binhai New Area CBD, e.g. Yujiapu Financial District and Xiangluowan Business District. The size of the area and the diversity of the industries contained therein give Tianjin FTZ a good platform to develop in the future. Thus, the local government should utilise the opportunity to promote the businesses and the real estate in these areas.

The Tianjin government can help local businesses by:

• Learning from the Shanghai FTZ and adopting the most successful policies;
• Streamlining processes so as not to delay implementation of reforms, which has been a common complaint in Shanghai;
• Positioning the FTZ to benefit from the regional growth spurred by the Capital Economic Circle integration plan.

At the moment, plans are still unclear, but details regarding the Tianjin FTZ are expected to be released by year-end. More specific rules and policies relating to the area are expected to be phased in over the next one or two years. However, the government has the opportunity to use the FTZ to help improve the local economy and generate more business activity for existing companies.

For more details read our November issue of Tianjin Property Insight.

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