Research On The Institutional Innovation Of China Pilot Free Trade Zone

With China’s economy entering a great turning point,to establish China Pilot Free Trade Zone becomes a major strategic decision of the Party Central Committee and the State Council.Recently we have 11 Free Trade Zones since the first China(Shanghai)Pilot Free Trade Zone has been established in September 2013.As a new growth point of China’s economic development,the reform experience is continuously deepening,resulting in many innovative contributions and over 100 reform pilots.In contrast to the Pilot Free Trade Zone,the contributions of many established zones aiming as the preliminary tests of institutional mechanism reform,such as "pilot zones","demonstration zones","high-tech zones" and "industrial parks",are very limited.Most of them are not able to replicated and extended,and even those highly-anticipated National Pilot Zones for Overall Reform have not reached the expectations.The main reason is the approaches and methods for executing the policy.In the earlier stage of reform and opening up,many reforms were launched at the regional and bottom level,and then spread out to the whole country with the successful experience.This approach was vividly described as "wading across the stream by feeling the way ".However,not all major reforms adopted this bottom-up innovation approach.In fact,due to the big difference of the policy environment and topics,the types of policy experiments are very complex and diverse,and their evolution processes are quite heterogeneous.The main reason that the China’s reform is able to be continuously deepened and opened up is not to insist on carrying out only one static rules,instead,to select feasible and dynamic solutions corresponding to the changes in the environment and policy issues,and even choose totally different methods in different periods and areas.Compared to the previous experiments,the innovation of China’s Free Trade Pilot Zone has a unique driving force mechanism,which is also an important reason for its fruitful achievements.To sum up the experiences not only can better advance the development and construction of the free trade trial zone,but also provide good ideas and institutional support for the comprehensive deepening of reforms in other areas.Based on the aforementioned challenges and critical thinking,this dissertation proposes an in-depth and systematic study of the innovation in free trade pilot area and creates some discussions on the methods of deepening the reform,by employing the institutional innovation theory,regional economic growth theory and policy experiment theory.The remainder of this dissertation is organized as follows:Section 1 mainly introduces the background and motivation of our research,involving the literature reviews in China and foreign countries,ideas and methods,the content and outlines,and the innovations and shortcomings.In section 2,the related concepts and fundamental theories are discussed.It mainly distinguishes or elaborates many concepts such as the free trade zone,free trade park,free trade pilot zone,negative list,gradual reform,and top-level design.Additionally the institutional innovation theory,regional economic growth theory,and the policy test theory are further discussed in this section.Section 3 illustrates the establishment background,strategic significance and development history of the China Pilot Free Trade Zone.First,the international environment and domestic background of the free trade pilot zone is introduced,and then the strategic orientation is further elaborated.Finally,it reviews the three stages of development and creation of the China’s free trade pilot zone.This section concludes that the establishment of China’s Free Trade Pilot Zone is significantly important and has been continuously implementing under the top-level design of the country.The achievements of the institutional innovation in China’s Free Trade Pilot Zone are shown in section 4.Taking the Free Trade Pilot Areas of Shanghai,Guangdong,Tianjin and Fujian as examples,this section summarizes four aspects of institutional innovation in terms of the investment management,trade supervision,financial openness,and beforehand and afterwards supervision(each of them is further divided into a few subsections).Finally,the results of the institutional innovation are shown in tables.Section 5 presents the institutional innovation of China’s free trade pilot area.First,it elaborates the previous promotion mechanism of the regional policy experiments,and then summarizes the innovation and evolution process of the free trade pilot zone.Furthermore,it also summarizes the difference of "experimental nature" to the prior policy experiments.By analyzing the ways of innovation and effective motivation approaches,this section illustrates the dynamic mechanism for continuously.By applying the example of the China(Shanghai)Pilot Free Trade Zone,the analysis of the effect of system innovation is analyzed in section 6.Generally speaking,three aspects are mainly studied as the comparison before and after the establishment of the pilot area,the institutional dividends reflected by the growth rates of fixed assets investment and import and export,regional foreign investment and the actual utilization of foreign capital reflected by the efficiency of capital flows,as well as the regional industrial added value growth rate and GDP growth rate reflecting the long-term basis for economic growth.The double difference method of the traditional policy analysis approach and the counterfactual analysis theory of the recent development are used in this work.Section 7 proposes the suggestions regarding to promote institutional innovation in China’s pilot free trade area.First,it analyzes the issues and challenges in the institutional innovation of the China Pilot Free Trade Zone.According to the existing problems,this section further provides some countermeasures and suggestions from the top-level design and institutional innovation.Section 8 concludes the dissertation as follow: 1)a series of policy experiments have been executing to the China’s Pilot Free Trade Zone,providing many important experiences for deepening reforms.However,there are still some difficulties and obstacles in the institutional innovation,which require relevant departments to seriously study and continue to promote reforms.2)The key to successfully promoting the institutional innovation in China’s pilot zones is the fundamental change in the way of the reform promotion.Because of the top-level design and promotion,it is no longer necessary to rely on the “test-driven development” approach for institutional experiments.3)In the context that our country’s legal system is becoming more and more complete,the key to comprehensively deepening reforms lies in the reform of laws and regulations.Any major reform must adhere to the reform of laws and regulations,legislation,and legal evidence.4)As a guarantee of the implementation for institutional innovation,an effective reform of incentive mechanism is required to strengthen the construction of the coordination mechanism between departments and localities,and form a concerted effort to promote reforms.5)The policy experiment of the China Pilot Free Trade Zone has yielded a significant institutional innovation dividend and accelerated capital flows,and more important,it has an important impact on long-term growth of China’s economy.