Tianjin: A Dialogue between Free Trade Reform and Urban Transformation 【 10th Anniversary of Free Trade Zone · National Visit ② 】

Starting from the capital, taking a train with the prefix G only takes half an hour to reach Tianjin Binhai Station.

This is probably the closest high-speed railway station to CBD. Yujiapu Financial District, a place full of high-rise buildings along the Haihe River, resembling Lujiazui, is separated from Binhai Station by only one Jinhe Road.

Since the establishment of Tianjin Pilot Free Trade Zone on April 21, 2015, Yujiapu and Xiangluowan on the opposite bank of the river have announced their decoupling from their thousands of years of fishing village history with a fast-paced construction pace, becoming the central business district of the free trade zone. The Binhai Station has thus become a window for external observation of the Tianjin Free Trade Zone:

The high-speed rail station is adjacent to the underground shopping street of "Global Shopping". People sit on the train to place orders and get off the train to go to the shopping street to pick up goods. The initial understanding of free trade strategy among ordinary people began with these rich and cheap cross-border goods.

In 2020, well-known reasons caused this window to be falsely closed. Not only has "Global Shopping" suspended operations, but many shops in Yujiapu have closed down. Various speculations and doubts online surround Yujiapu's development, and point to the practice of free trade strategy.

At the beginning of April this year, when reporters were walking rapidly in this small-scale and advanced planning concept CBD, but only found a McDonald's to rest, countless questions flashed through. It was not until our footsteps delved deep into the entire coastal area and the Tianjin Free Trade Zone that we finally deeply felt that the endogenous connection between a national strategy and a city is never something that can be explained on any surface. The matrix of China's free trade elites in opening up to the outside world cannot be fully understood by just one window in terms of how they embrace the world.

In the urban transformation, history has already laid a hidden line

One north and one south, two coastal cities, Tianjin and Shanghai have too many similarities.

In 1990, Pudong New Area was developed and opened up. Four years later, the prototype of Binhai New Area, with Tianjin Economic and Technological Development Zone, Bonded Zone, and Tianjin Port as the backbone, gradually emerged. They are all on the east side of the main city, starting from a mudflat, with a long coastline. Among the 19 national level new areas in China today, they have all been or are currently at the peak of GDP and are undoubtedly the development engines of their respective cities.

The difference is that history has brought more severe tests to Binhai.

After the establishment of the People's Republic of China, Tianjin's status plummeted from being an economic center in the north to being one of the important industrial cities in the north. To revitalize the economy, Tianjin has proposed to take the construction of the coastal area as the driving force and carry out independent reforms. The plan is to achieve 40% of the GDP of the entire coastal area and 50% of Tianjin's foreign trade in 10 years.

The desperate efforts for change have finally brought Tianjin into the new century with a new halo. At that time, economists generally believed that after Shenzhen in the 1980s and Pudong in the 1990s successively embarked on a "pole driven" coastal economic development and opening up path, Tianjin Binhai was expected to become the "third growth pole" of China's economy.

In 2005, Tianjin Binhai New Area was officially included in the "Eleventh Five Year Plan" and included in the national development strategy, becoming a national level new area supported by the state for development and opening up. In the situation where secondary industries such as manufacturing, heavy industry, chemical industry, and raw material transportation are still dominant, Binhai is rapidly promoting building development, and the carrier space of tertiary industries is growing rapidly at a rate of one million square meters per year.

However, compared to Pudong and Puxi, which are only separated by a river and urban resources can flow efficiently, the distance between Binhai and Tianjin urban area is more than 50 kilometers, making it difficult to import population and industries. By 2014, due to a large number of construction shutdowns and vacancies in the Yujiapu and Xiangluowan areas, they were given the nickname of "ghost city" by the people.

Binhai urgently needs a new top-down strategic positioning to break the deadlock again.

In 2013, the country launched a major strategy for the construction of free trade zones to comprehensively deepen reform and opening up. In 2015, Tianjin was fortunate enough to be included in the second batch of free trade zones in China. With the Binhai New Area as the fulcrum, it was divided into three major functional areas: Tianjin Dongjiang Port Area, Binhai New Area Central Business Area, and Tianjin Airport Area.

With the promotion of free trade reform, Binhai has begun to raise the banner of industries such as factoring and financing leasing that were previously unimaginable and could not be promoted. The unique sea, land, and air port functions of Tianjin Port, a gateway to the sea adjacent to North China, and Binhai International Airport, a national first-class aviation port, have also nurtured Tianjin's unique emerging industries such as bonded aircraft maintenance and second-hand car exports. Supported by a series of trade facilitation policies such as FT accounts, priority will be given to their implementation within the region, and a new wave of investment promotion will soon arrive.

"That was really a shining moment in the coastal area. The construction of the entire Yuxiang area has been further accelerated, with about 60 buildings built and nearly 20000 enterprises introduced. The surrounding parking spaces become very tight by noon," said Shao Xinchun, Deputy Director of the Financial Bureau of Tianjin Economic and Technological Development Zone.

The entry of enterprises has to some extent alleviated the supply-demand imbalance encountered in the early stage of the building market, and gradually improved the long-standing industrial structural problems in the local area. By 2019, compared to the GDP proportion of Pudong's tertiary industry exceeding 77%, Binhai had also broken through the 50% level line.

Perhaps it was a specific strategic opportunity, or perhaps everything had already laid its foundation - in 1930, relying on the foreign trade dividend of Tianjin Port, Tianjin became the undisputed economic center of the north. 50 years later, the desolate Tianjin also regained its former glory in foreign trade with South Korea and Japan.

"Today, when we look back, Tianjin's history has repeatedly proven that opening up to the outside world is the right choice to seek truth from facts," said He Jiang, Director of the Airport Area Work Bureau of Tianjin Free Trade Zone.

In the process of trial and error, find the right direction for development

On April 19, 2020, a Boeing 747 freighter landed at Shanghai Pudong International Airport, loaded with LEAP-1A spare engines imported through a partnership between Changlong Airlines and CMB Leasing.

At the same time as the engine was unloaded, transferred, and stored in Shanghai, the customs in the Dongjiang area of the Tianjin Free Trade Zone accepted its import, leasing, and trade tax declaration services from another location. Within one day, the procedures were completed and the engine officially entered the country, and was transported to Long Dragon Airlines' base in Hangzhou.

Liu Qingliang, Director of the Free Trade Bureau of the Dongjiang Area Management Bureau, told reporters that since the end of 2009 when Tianjin introduced and delivered two Boeing B777-F freighters through bonded leasing, the goal of "speeding up" aircraft leasing and reducing enterprise leasing costs has become a persistent concern for many local officials. In the face of the large-scale development of the financing leasing industry, there are constraints from traditional regulatory models and a complex administrative system that is interconnected.

"At that time, I had just started working and couldn't believe that the total number of aircraft rentals in Eastern Xinjiang could one day exceed 2000, becoming the world's second largest aircraft rental center after Ireland," said Liu Qingliang.

After the listing of the Tianjin Pilot Free Trade Zone, Dongjiang fully utilized the core concept of "pilot free trade", continuously promoted policy innovation, and gradually formed more than 40 innovative leasing models, resulting in the first innovative business of "passenger to cargo" aircraft in the comprehensive bonded zone in China, the first private economic development support bond in the country, and the first low-carbon transformation linked corporate bond in the leasing industry.

In the eyes of many industry experts, emerging industries, high-end industries, and even niche industries developed based on free trade strategies such as factoring, second-hand car exports, and financial leasing may not bring short-term shocking GDP figures to Tianjin, but they have profound significance in driving the formation of higher quality industrial clusters and building a modern economic system in the local area.

Under the new comparative advantage, Tianjin is gradually getting rid of the dilemma of "not growing grass under big trees" in the process of regional coordinated development.

In the long history of China, whether by canal or by sea, Tianjin was a necessary passage for southern goods to reach Beijing. The needs of the national center have turned Tianjin into a major commercial center in the north, while also serving as a functional support for the capital.

Some industry observers believe that the reason why Binhai inevitably faces difficulties in attracting investment and oversupply of buildings in the early stages of development is fundamentally due to the convergence of industrial positioning with Beijing, but without the latter's talent, capital, and strategic position.

After entering the national free trade strategy system, Tianjin became the first pilot free trade zone in northern China, expanding its service and demonstration radius from Tianjin to the Beijing Tianjin Hebei urban agglomeration and even the broader northern land.

This is undoubtedly a role transition, and Tianjin has finally found a special initiative in regional integration. And the market has also become interested in re examining the value of Tianjin under the pretext of "investing in free trade hotspots".

Liu Changbo, CEO of China Enterprise Cloud Chain, told reporters that Tianjin Binhai and Shenzhen Qianhai are the two regions that attach the most importance to factoring business in various free trade zones across the country. The innovation concept of the free trade system has loosened the constraints on the model innovation of the factoring industry. "We have practiced many things that we couldn't do or haven't done before in Tianjin," he said

In recent years, China Enterprise Cloud Chain has devoted itself to the development of industry finance Internet. In the national layout of enterprises, Tianjin's position remains important. "We will place the trial center and service center in Binhai, and next, the fintech research and development center will also be located in Binhai."

Liu Changbo pointed out that the biggest regional value of Binhai is its advantages in Tianjin's household registration policy, medical education, and high cost-effectiveness of local human resources. "It is very suitable as the deputy headquarters of financial enterprises to carry out mid to back-end business, with the highlight of 'livability', competing with Beijing in a staggered manner."

Chengdu has successfully walked this path of mismatched competition. Nowadays, more and more Internet business owners and financial business owners vote with their feet, which shows their confidence that Tianjin can also succeed.

Under the inertia of reform, brewing new driving forces for cities

The reporter sat down on the sofa in He Jiang's office and within 5 minutes, saw him anxious twice.

Once I heard about a local enterprise that could carry out a business in Guangzhou, but couldn't land in Tianjin. This man of some age impatiently asked his deputy to quickly call the company.

When mentioning the current reform status of the free trade zone, He Jiang raised his voice and said, "Should the free trade zone focus on institutional innovation or attract investment? I think we need to figure it out..."

These two times precisely hit the two key questions that urgently need to be answered in the 10 years since the implementation of China's free trade strategy: has the government's functions changed? Has reform and innovation come to a halt? Tianjin has given us explicit and vivid answers.

Tianjin Haite Aircraft Engineering Company, a free trade zone enterprise, received a "passenger to cargo" order from Panama a few years ago. At that time, because there was no precedent for accepting overseas order business, the local government came forward as a case study to resolve the issue. However, no normative institutional documents were formed afterwards, and the company was questioned in its dealings with other overseas clients, resulting in many collaborations being hindered.

"This has taught us a profound lesson. If we do not deepen and solidify the effectiveness of the pilot free trade reform in a timely manner, market entities will be at a disadvantage when facing global competition." He Jiang said that after that incident, the Tianjin Free Trade Zone quickly introduced policies related to bonded maintenance and made government transparency the first time, and the overseas orders of Haite Aircraft were preserved.

Another story is equally thought-provoking. Since the completion of the first national second-hand commercial vehicle export business in 2019, the second-hand car export industry in Dongjiang has started. However, it was not until May 30th this year that the pilot enterprises for exporting second-hand cars in eastern Xinjiang had just expanded to 16. Some companies have reported that the strict evaluation and high threshold for pilot license plates have led to many experienced and even knowledgeable companies being rejected.

"The more fair, the more development, and the more strict, the more agglomeration." Liu Qingliang said that there is never a standard answer to the best business environment. "However, an environment that can be expected by the market, with publicly available standards, and effectively preventing bad currency from driving out good currency is definitely a good environment." In the first four months of this year, one of the few pilot enterprises completed the export of 2077 second-hand cars in eastern Xinjiang, with an export value of over 53 million US dollars, a year-on-year increase of nearly six times. The data once again confirms Liu Qingliang's judgment.

In fact, what the reporter saw in Tianjin was not only the reform process mentioned above, but also the inertia of reform. A financial director used a trendy phrase when talking about serving enterprises, "Party A's father," which means that serving enterprises should have patience, attitude, and strength to deal with Party A. Another classic quote from a cadre: "How many coordination meetings and phone calls are good cadres? Ask yourself more, have the problems of the enterprise been solved?"

We have reason to believe that as the relationship between the government and the market is reshaped in various reforms of free trade, there will also be a change in the image, philosophy, and motivation of a city.

Before the reporter left Tianjin, He Jiang continued his anxiety: after Haite and three other enterprises conducting bonded maintenance and remanufacturing business outside the customs special supervision area were approved, this policy opening was tightened again. What can he do?

Liu Qingliang is busy with the issue of a new batch of pilot license plates for the export of second-hand cars. "Don't look at it as niche, it will become Tianjin's characteristic advantageous industry after development and growth."

And the "window" of the Binhai high-speed railway station has not really been closed. The latest news is that the "Global Purchase" project in Tianjin Free Trade Zone is expected to restart.

As the old saying goes, free trade reform has no end, and it is always on the way.