Press Conference to launch the 2011 World Free Zone Convention to be held on 10 and 11 November 2011, Shanghai
Mr Chairman, distinguished colleagues from the Shanghai Free Trade Zones Administration, the China Free Trade Zone and Export Processing Zone Association, the Pudong New Area Peoples Government, ladies and gentlemen.
The eyes of the world are on China's outstanding record of economic innovation and growth. As the world's second largest economy it's growth rate has been more than three times the world economy average foir the last thirty years, and last year it contributed almost one third of global growth.
China's growth rests on rapid structural change, industry upgrading and an export market share of products that are intensively based on research and development - growth which increased to 13% from 3% between 2000 and 2008.
China's Free Trade Zones are inseparable from this record of economic success. With the Shanghai Free Trade Zones in the lead, it is no surprise that the participants in the World Free Zone Convention are coming to China this year to learn about the lessons of success and to share in discussions on the future development of Pudong New Area as it further develops its role in the world economy.
Free zones around the world are particularly interested in the three zones and three ports concept and in the way Shanghai FTZA has brought the flagship zones Shanghai Waigaoqiao Free Trade Zone, Yangshan FreeTrade Port Area and Pudong International Airport Free Trade Zone under unified management. They want to learn about the way in which businesses benefit from more opportunities and lower operating costs as a result of this close linking of policies, resources and functions. They are excited by the impressive new concepts such as the International Trade Settlement Centre and the extension of the activities of free trade zones into new functions like delivering futures under bonded status. Last year I was pleased to take part as a judge in the Financial Times fdi magazine whose global survey ranked Shanghai Waigaoquiao Free Trade Zone first out of more than 700 zones examined across the globe.
It is a source of enormous pleasure that China has actively participated in the work of the World Free Zone Convention for several years, notably when Mr Zhen Pu as Chairman of the Chinese Free Trade and Export Processing Association addressed the eighth World Free Zone Convention in Charleston, United States of America on the status and outlook of special customs supervision zones in China.
The participation of two Vice Chairman and one Secretary General of the CFEA in WFZC meetings in Brussels and in Kuala Lumpur have encouraged our colleagues in free zones around the world to learn more about China's policies and approaches.
As I mentioned, China's economic restructuring and growth over three decades has led to a powerful export performance. It has been accompanied by prudent and realistic policies of economic management which have helped to protect China from global economic turbulence. Volatility and challenges are clearly still with us, but China's record of innovation, business-friendly policies and careful macroeconomic supervision give great confidence that the China success story will continue vigorously and securely, with free trade zones in the vanguard of new economic development and advance. China is fortunate in her wealth of talent and the way she harnesses experts of the highest world quality to guide her economic development.
Academic research, particularly at Oxford University by Dr Fu Xiaolan, shows that the national and provincial development zones in China have played an important role in the Chinese economy and are regarded as the engine of growth in the regions. They have greatly contributed to foreign direct investment inflows and trade, especially processing and high tech exports together with industrial output and GDP. They also account for the bulk of employment provided by China's foreign-funded enterprises. They contribute significantly to imporoving wage levels, the levels of informal and female employment, labour training, skill upgrading, the setting up of worker organisations and corporate social responsibility. This is a powerful and encouraging picture.
The preferential taxation policies within zones, together with strong foreign direct investment, lower transaction costs and other preferential government policies have made China's free trade zones the hot spot for growth of processing exports. The globalisation of production has further fuelled this trend and established China as an important link in the global value chain. It is this high percentage of foreign investment and high percentage of high tech industries which facilitates internationally-efficient business location, the promotion of processing trade upgrading China's openness to the world and bringing improved competitiveness of the region as well as higher employment levels.
The development of large scale free trade ports is powerfully attractive to world markets and in Shanghai this is particularly notable. It reminds us that, as Mr Zhen Pu noted when he addressed us, the original free ports in Europe were based on a similar approach. They demonstrate China's commitment to open international trade which is also marked by the construction of the Shanghai International Trade Centre.
The first Free zones were found in the free cities of the Hanseatic League and elsewhere in Europe in the 16th century and have zones have now spread across the globe. The foreign trade zone programme of the United States is a feature of 20th century legislation. Latin American economies have thriving free zones of which Panama is a very prominent and successful example. In the Arab Gulf and especially in Dubai major breakthroughs have been achieved by developing the zone concept into a raft of specialised high technology, media, airport, health and other zones bringing together centres of excellence and offering environments carefully designed to facilitate business investment and growth. Recently a zone programme has been established by legislation in India with an especial focus on small and medium sized businesses. The World Free Zone Convention has worked particularly closely with the more than 50 zones in the African continent and we were particularly delighted when the African Free Zone Association held its first convention in Dar es Salaam in Tanzania earlier this year.
But I must say that it is China's zones which hold an especial place in the future of the world's free zones because of their key role in China's economy, their scale, efficiency and innovation. That is why the world's zones are meeting in China to celebrate the achievements of China's free trade zones and to learn from them.
Around the world, an excellent overview by the World Bank published in 2008 says that the case for zones will be stronger in the context of trade liberalisation. It suggests that free zones can overcome policy distortions, procedural inefficiencies and infrastructural inadequacies in national economies.
"The continued development of focused investment promotion and export competitiveness mechanisms such as SEZ can provide a simplified, regulatory environment", the World Bank emphasises.
Let me just give you another World Bank highlight; it says that "the prevalence of zones in industrialised countries with open economies also underscores the importance of the concept to competitiveness".
And the World Bank believes that zones have the opportunity to differentiate themselves and make themselves especially attractive to investors in terms of facilities, services and most importantly streamlined procedures and purpose-built technologies.
This is hugely important. Zones are moving from cargo transhipment centres to providers of services with high value-added. The most go-ahead countries are developing approaches which offer internet, health, airport and financial services. Shanghai Waigaoquiao is building upon its stunning record - import and export volumes of 77bn US dollars last year, and tax revenues of 8.3bn RMB per square kilometre, to move in this direction.
Trade settlement, finance lease, clearing of financial transactions, headquarter facilities for transnational enterprises - these measures being introduced in Shanghai are at the cutting edge of zone development and as they develop will place Shanghai and China in a powerful competitive position - free trade zones will become free zones with powerful attraction for regional businesses to headquarter in them.
In the World Free Zone Convention we seek to provide an opportunity for the world's leading zones to come together to examine a range of issues, examine the state of the World's economy, learn lessons on maximising free zone success and focus on best practice in the year ahead
Models of free zones differ around the world and there is a healthy process of innovation and competition between them. This makes it especially important for zones from around the world to learn about new innovation, best practice and signs of powerful and sustained growth.
It is therefore a particular pleasure to be working together with the Shanghai Free Trade Zones Administration and the China Free Trade Zone and Export Processing Zone Association in planning this important convention. We believe that its results will be seen in learning from China. It will be an opportunity for some of the world's largest, strongest and most successful free trade zones here in China to showcase their approaches and we look forward to this with great anticipation.
Graham Mather, Chairman, World Free Zone Convention and President, European Policy Forum, London and Brussels.