Shen Hongchen arrived at the Shanghai Free Trade Zone (FTZ) management office at 5:40 a.m. on Oct. 28 to submit his company registration application. But even though he arrived so early, there were still six people before him in the queue. After the Shanghai FTZ opened on Sept. 29, people began queuing every day at 5:30 a.m.

Shen's company is a steel import and export company based in Shenyang, in northeastern China. He wanted to set up an office in the Shanghai FTZ because of the low tariffs and simple customs procedures. "Last year, our company bought a batch of steel from Germany. It took us 14 months to go get it through customs. If we have an office in the FTZ, we can reduce this by about two months," he said.

Accumulating experience in the Shanghai FTZ

China has established six Special Economic Zones similar to the Shanghai FTZ, but the Shanghai FTZ is the first zone that fully conforms to international practices.

This marks China's attempt to "open up in key areas to drive regional development," according to the report at the 18th National Congress of the Communist Party of China (CPC).

Sun Lijian, deputy dean of the School of Economics of Fudan University, said that unlike the liberalization policies after China's accession to the WTO, which mainly opened China's goods trade, the Shanghai FTZ will promote the free flow of factors of production at a higher level and help China to accumulate experience in carrying out new international business practice, which will help China continue to open up to the world in more sectors, upgrade its own economic growth model.

Strengthening economic ties with FTA partners

The CPC top leadership said in the report to the 18th CPC National Congress that in order to open up its economy further, China should plan comprehensively for bilateral, multilateral, regional and sub-regional opening up and cooperation, continue with the strategy of building free trade areas and promote an infrastructure to connect with neighboring countries."

One of the attempts to achieve this goal is the ongoing negotiations with Japan and South Korea on establishing a free trade area.

In early August, China concluded a second round of trade negotiations with Japan and South Korea. A wide range of topics were discussed in detail, including goods trade, service trade, the rule of origin, customs procedures and simplifying clearance, solve trade disputes, quarantining animals and plants, policies of competition, intellectual property rights and e-commerce.

China has been Japan and South Korea's top trading partner for several years, and Japan and South Korea are China's second and third largest trade partners. Establishing a free trade area would benefit all three parties as their economies and industries are mutual complementary, and together they have great potential for development.

So far, China has signed free trade agreements with ASEAN, Singapore, Pakistan, New Zealand, Chile, Peru, Costa Rica, Switzerland and Iceland.

Meanwhile, China is also discussing free trade deals with the Cooperation Council for the Arab States of the Gulf (including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Australia, Norway and the Southern African Customs Union (including Botswana, Lesotho, Namibia, South Africa and Swaziland). It is also exploring a free trade agreement with India.

China's international cooperation has produced great mutual benefits. The China-ASEAN FTA has made ASEAN the largest beneficiary of China's fast economic growth. ASEAN has enjoyed a trade surplus with China for almost 10 years, and China has maintained a favorable balance of trade worldwide. ASEAN's trade surplus to China in 2011 was US$22.7 billion.

China and ASEAN have developed a clear division of labor. The media had previously speculated that China and ASEAN countries would become competitors in exports, especially in exports to the U.S., whereas in fact China has focused on assembling goods while the ASEAN countries have focused on producing components. Although ASEAN exports to the U.S. have declined, its exports of components to China have increased. After being assembled in China, the products still reach the U.S. market.

Expanding free trade and investment over the next decade

The report to the 18th CPC National Congress said that China will "promote and facilitate free trade and investment and oppose all forms of protectionism."

To open up further to the world and attract more investment over the next decade, the Chinese government should improve its environment for investment, said Long Guoqiang, a researcher at the State Council Development Research Center.

To be specific, the Chinese government should develop stable, transparent and predictable policies, treat foreign companies the same as Chinese companies, and adopt the 'negative' list approach, to allow foreign companies to enter China unless their business is specifically banned on the list, and treat foreign and domestic companies with the same laws and regulations, Long said.