FTZ plans pursued for wrong reasons

After China officially opened its first free trade zone (FTZ) in Shanghai, additional plans were soon submitted with central authorities for the establishment of similar zones in Tianjin, Suzhou and Xiamen, among other places. After a while, China's top leaders called for a suspension of FTZ proposals since most of them lacked innovation.

It's not surprising that so many localities were eager to establish their own competing zones. Local authorities often pursue large prestige projects as a strategy to bolster their performance records.

The FTZ in Shanghai was designed as a testing ground for economic and financial innovations. If other local governments want to get on the bandwagon, they should think about creative ways to leverage their local advantages within such a project.

The central government should set up clear regulations and standards pertaining to the approval of such zones. Long-term mechanisms are also needed to optimize these projects for the benefit of the domestic economy at large.