The China (Xinjiang) Pilot Free Trade Zone (FTZ) was officially established on November 1, becoming the first such zone in China's northwest border region and the 22nd pilot FTZ in the country. The new pilot FTZ is expected to make Xinjiang a model for promoting high-quality development in the central and western regions. Foreign-funded enterprises are encouraged to invest in the region, where they will have equal access to industrial and regional development policies, Guo Tingting, Vice Minister of Commerce, said. “Foreign financial institutions will be supported in setting up banking, insurance, securities and other financial institutions in the Xinjiang pilot FTZ to provide international and diversified financial products and services,” Guo said. Analysts said that in the past decade, Xinjiang's construction lagged behind the domestic average, which means that there is huge space to make up for shortcomings. According to a report by the China Council for the Promotion of International Trade (CCPIT), more than half of the surveyed foreign-funded enterprises that intend to increase investment in China are considering to raise capital in the western region.
There is also large scope for infrastructure exchanges between Xinjiang and the five Central Asian countries. The Xinjiang FTZ will strengthen the construction for the China-Europe Railway Express, and speed up the development of railway and highway multimodal transport among China, Kyrgyzstan and Uzbekistan. The FTZ will also explore new ways to develop China-Pakistan transport cooperation, Li Xuan, Deputy Director of Xinjiang's Commerce Department, said. Xinjiang has 18 national ports open to the outside world, 118 international road transport lines, 23 China-Europe Railway Express routes, 33 international air routes, three West-East gas pipelines, 26 cross-border optical cables and two outbound electricity transmission channels. The Xinjiang FTZ should speed up the Customs clearance time, and make other support services more convenient. “We used the outbound China-Europe Railway Express routes through Inner Mongolia, but now we are considering using the route through Xinjiang. After all, the Xinjiang route passes through more countries and reaches more destinations,” Yiwu-based logistics agent surnamed Yu told the Global Times. The company's cargo transport service by truck goes through Xinjiang's Alashankou Port. Enhanced infrastructure connectivity will turn Xinjiang into a key transportation, trade, logistics, culture, science and education center. Xinjiang is also a core area on the Silk Road Economic Belt, which is part of the China-proposed Belt and Road Initiative (BRI).
“Xinjiang is at the forefront of China's westward opening-up and a major node of the China-Europe Railway Express. Xinjiang is also the province that has the largest number of neighboring countries,” said Bai Ming, Deputy Director of the International Market Research Institute at the Chinese Academy of International Trade and Economic Cooperation. Bai noted that the construction of the FTZ can also benefit local industries. According to MOFCOM, the Xinjiang FTZ will vigorously develop the garment and other textile industries, and build a national high-quality cotton yarn production base. The FTZ will improve the standardization and scale of the processing industry for forest fruits, wine, dairy products and other specialty foods, the Global Times reports.
The South China Morning Post adds that the focus of the FTZ will be on “innovative” and “labor-intensive” manufacturing industries in three areas: Kashgar, Khorgos and the capital city of Urumqi. In the pilot scheme, Urumqi is being designated an international trade and logistics hub, while Kashgar will focus on “labor-intensive industries” such as agricultural-products processing and the manufacture of garments and electronic components. Khorgos, on the border with Kazakhstan, will be a cross-border trade port and a hub for medicine manufacturing and the digital economy. Xinjiang will build more data and computing centers to play a proactive role in the national initiative of “Eastern Data and Western Computing” which aims to channel more computing resources from China’s economy-driving eastern regions to less-developed western regions. “The shifting of data-related industries to Xinjiang should be sped up,” according to the plan. Meanwhile, Xinjiang will continue to develop its traditional industries, including manufacturing of solar panels and agricultural staples such as cotton.
Xinjiang’s exports jumped 48.8% to CNY213 billion in the first nine months, while its imports expanded by 40% to CNY40 billion. In recent years, electric vehicles, lithium batteries and solar cells have replaced electro-mechanical products, apparel, shoes and hats as Xinjiang’s main exports.
Xinjiang has become a geopolitical sore spot between China and Western countries. The U.S. and the European Union have launched sanctions and export controls on the region following accusations of human rights abuses that Beijing has denied. The announcement of the pilot FTZ shows how Xinjiang is adapting, with greater emphasis placed on the region’s geographical advantage – notably its shared border with eight countries, including Russia, Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan and Pakistan, all of which are part of the Belt and Road Initiative (BRI).
