Over the past two years, the Guangxi Pilot FTZ has accelerated the construction of infrastructural facilities and taken active steps to align its progress with national strategies for development.
The staff of Nanning Post Customs routinely checking packages on August 25, 2020.
Guangxi Zhuang Autonomous Region in south China boasts beautiful natural scenery and rich resources. With a solid industrial foundation, the region houses many world leading enterprises. However, for many years, Guangxi had lagged behind other provincial-level regions of China in development. Though it borders Vietnam, the autonomous region failed to develop a strong export-oriented economy. Its link with the domestic market was also weak. The lack of systematic policies and high-level platforms for opening-up hindered Guangxi’s development.
In 2019, the China (Guangxi) Pilot Free Trade Zone (FTZ) was officially inaugurated. It covers three parts in Guangxi’s cities of Nanning, Qinzhou, and Chongzuo. Over the past two years, the Guangxi FTZ has accelerated the construction of infrastructural facilities and taken active moves to align with national strategies for development. It has not only provided Guangxi with an important platform to explore institutional innovation, but also emerged as a significant part of China’s strategic opening-up layout by blazing new trails for higher-quality China-ASEAN economic cooperation.
In international trade, the Guangxi FTZ has reduced trading costs with trade facilitation measures. More prominently, it has become more resilient in the face of external challenges thanks to its trading foundation and capacity in innovation.
The COVID-19 pandemic hit the global economy quite hard during the last two years. Nevertheless, China emerged as the only major country registering economic growth in 2020, achieving GDP growth of 2.3 percent. Guangxi’s GDP grew 3.7 percent year on year, ranking 13th among the 31 provincial-level regions on the Chinese mainland. The size of Guangxi’s economy is only one fifth of its neighboring coastal province Guangdong, but still one quarter larger than that of Vietnam. Guangxi’s imports and exports in 2020 amounted to RMB 486.1 billion (US $76.2 billion), a year-on-year increase of 3.5 percent, and the growth rate was 1.6 percentage points higher than the national average.
Facing volatile supply and demand caused by the COVID-19 pandemic, the Guangxi FTZ, a hub of export-oriented enterprises, has emerged as an important force maintaining the stability and sustainability of foreign trade for the autonomous region. In 2020, the FTZ registered RMB 158 billion (US $24.8 billion) in imports and exports, accounting for nearly one third of the regional total.
Pingxiang, a county-level region included in the Guangxi FTZ, borders Vietnam and has seen robust border trade despite the pandemic. Pingxiang introduced new measures including extending custom clearance time and allowing custom clearance of finished vehicles among others to facilitate border trade.
The measures basically offset losses in trading brought by pandemic response actions. Starting in August 2020, the Guangxi FTZ had seen stable growth in foreign trade for five consecutive months. In 2020, its annual import and export volume exceeded RMB 158 billion (US $24.8 billion), accounting for nearly one third of that of Guangxi as a whole. The total annual border trade volume accounted for nearly half of the national total.
An FTZ is not only a place that facilitates trade activities, but also serves as an important platform for the coordination of industrial and supply chains. The role of an FTZ is largely reflected in two-way cross-border investment, especially in the use of foreign capital. According to statistics, since its establishment, the Guangxi FTZ has attracted more than 33,000 enterprises to open up shops in the area, nine-fold of the figure before the FTZ was established. More than 33 percent of foreign investment for Guangxi went into the FTZ.
Over the past two years, business environment in many countries has undergone significant changes due to the pandemic, and cross-border investment plunged worldwide. According to the World Investment Report 2021 released by United Nations Conference on Trade and Development on June 21, 2021, global cross-border investment in 2020 dropped by 35 percent from the previous year.
By contrast, foreign investment in actual use in Guangxi amounted to US $1.3 billion in 2020, an increase of 18.7 percent year on year. Nearly half of the total circulated in large projects worth more than US $30 million. During the first quarter of 2021, 6,320 new enterprises began their operations in the FTZ, an increase of 402 percent year on year; the number of newly established foreign-funded enterprises increased by 146 percent year on year. Along with thriving investment activities in the FTZ is increasing demand for improved infrastructure. In this way, the Guangxi FTZ is generating a positive spillover effect on local economy and society.
The Guangxi FTZ has made great strides in advancing institutional innovation. It has accumulated effective practice and measures in improving services, upgrading investment and trade models, facilitating customs clearance, and opening up the financial sector and the service industry. These new measures have improved the business climate for investment, laid a legal foundation for the development of emerging industries and business models, and enhanced the efficiency of economic activities by streamlining administrative procedures. For example, Guangxi Zhuang Autonomous Region Tax Service has implemented a streamlined procedure for closing a tax-paying account in the FTZ. Eligible tax payers can now finish the cancellation procedure within five minutes. The moves make it easier for market exit. Together with efforts to expand market access, it improves efficiency in resource use and protects the interests of market entities.
The Guangxi FTZ is well prepared for potential risks in various areas. For example, it provides comprehensive services for businesses going abroad and has put in place a risk prevention mechanism. While facilitating cross-border investment and finance, the FTZ strengthens efforts in identifying major risks and forestalling systemic financial risks. While encouraging technological innovation, the FTZ works to improve the risk-sharing mechanism for pledge financing, and the mechanism for risk prevention and handling. In order to cushion external shock on local economy, the FTZ focuses on improving the competitiveness of key and core industries and enabling coordination across the industrial spectrum with support in the fields of financing, logistics, information, and intellectual property protection.
As it turns three in August this year, the Guangxi FTZ stands on the cusp of new opportunities and challenges. On the forefront of China-ASEAN economic and trade cooperation, the FTZ needs to attain more effective and sustainable innovation, and foster industrial clusters with more distinctive features to further facilitate the Regional Comprehensive Economic Partnership and build stronger cross-border industrial and supply chains in the post-pandemic era.
ZHOU MI is a researcher with the Chinese Academy of International Trade and Economic Cooperation.
