Unity Between Economic Globalization and Economic Localization: An Interpretation of Shanghai Pilot Free Trade Zone from the Perspective of International Political Economics〔*〕

Zhu Shilong

(1.School of Marxism Changzhou University,Changzhou Jiangsu 213164;2.Research Center of City Diplomacy Changzhou University,Changzhou Jiangsu 213164)

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Unity Between Economic Globalization and Economic Localization: An Interpretation of Shanghai Pilot Free Trade Zone from the Perspective of International Political Economics〔*〕

Zhu Shilong1,2

(1.School of Marxism Changzhou University,Changzhou Jiangsu 213164;2.Research Center of City Diplomacy Changzhou University,Changzhou Jiangsu 213164)

The external background of the establishment of Shanghai Pilot Free Trade Zone is economic globalization and global trade competition.The internal background focuses on the following: the demand for further opening-up and economic development;RMB internationalization;the conditions such as concepts,policies,institutions and materials are possessed.It enhances China’s power in world economics: the massive concentration of enterprises and investment in Shanghai show their confidence and identity to Chinese government and market;the institutional innovation of finance and other fields reflects China’s determination and self-confidence of developing economy and participating in the process of globalization;economic growth increases China’s structure power and global interdependence enhances China’s relation power.

Shanghai Pilot Free Trade Zone;economic localization;structure power;relation power

Ⅰ.The dialectical unity between economic globalization and economic localization

1.Economic globalization and economic localization

One of the result of the economic globalization is the trend of economic localization,both of which are the relationship of dialectical unity.

It is well-known to all the economic globalization refers to the international economic activities are beyond the boundaries of the countries,with the liberalization of trade,production internationalization,globalization of capital,technology transfer and service globalization as its characteristics,to form an organic global economy depending and interrelating with each other.In other words,globalization means the inter-regional flow of production factors such as the capital,products,technologies,services,talents and so on.On the positive side,globalization plays a huge role in promoting the global economic development and the human cultivation.

The economic development of any country is subject to the resources and markets of the country.From the perspective of the global economic development,participating in the globalization is the most feasible choice if the country wants to get rid of the limits,because the economic globalization can optimize the production and sales,rationally allocate and utilize the resources and improve the economic efficiency.Meanwhile,the economic globalization can promote the international division of labor,give full play to the comparative advantage of each country,expand the scale of production and realize the scale effect.Economic globalization can accelerate the flows of production factors such as capital and technology throughout the world,and it can promote the industrial evolution and institutional innovation,which can finally promote the global economic development.

2.The connotation of the economic localization

The economic localization includes the regional centralization of production factors including capital and the regional agglomeration of products and services,which is the process of the demands from outside to inside combined with the demands from inside to outside.

Firstly,the economic localization is mainly manifested on the regional centralization of production factors such as capital.Capital is one of the precondition for economic development and the allocation of the capital in different regions is the main factor affecting the regional economic development,so the centralization of capital can provide a strong impetus for economic development.The process is realized by the fierce market competition with the characteristics of the fact that the capital will attract more capitals.

Secondly,the economic localization is manifested on the regional agglomeration of products and services.Under the influence of various factors,the situation of intense agglomeration will come into being in a certain region for a certain industry,making the industrial capital converge continuously in this field,which is the formation of the industrial agglomeration.Industrial agglomeration plays an important role to push the economic development such as the enlargement of the scale and reduction of the cost,which is helpful to realize the scale economy and the cultivation and utilization of the human resources,and the development of the external service and supporting facilities,and so on.

3.The reason of economic localization

Firstly,from the outside,the nature of capital and other production factors is for profit and security.The fundamental reason why economic globalization develops is the cross-border flow and operation of the capital and other production factors which can increase their values.Secondly,from the inside,the agglomeration effect of products and services can increase the regional competitiveness.In the era of globalization,the subjects of competition are all cultivating their own comprehensive capacity of struggling for the resources and market share to obtain a better development,and this comprehensive capacity is the regional competitiveness.Thirdly,investors show great confidence on the government and market of investment destination.As mentioned above,the first aim of the investment is to increase the values.If the investment destination can not bring the expected benefit,the investors will not continue the above-mentioned economic activities.On the other hand,if the society of their investment is not stable enough and the reputation of the government is not good enough and the security of their investments can not be guaranteed,the investors will also not continue the above-mentioned economic activities.Conversely,the situation is just the opposite.As for the other production factors,the case is similar.

Of course,there maybe exist other investment preferences such as the political,historical and cultural factors which make the international investment converge to a certain district,for example,the mutual investment between the Europe and America,the former European mother country’s investment in their former colonies,and Japan’s investment in the Southeast Asia.Although there are a lot of this kind of factors to consider,it is no deny that these investments get a generous financial returns.

Ⅱ.Shanghai Pilot Free Trade Zone: a combination and carrier between economic globalization and economic localization

1.The external background of founding the Shanghai Pilot Free Trade Zone

The further development of the economic globalization and the increase of the Chinese economy and market attraction provide great convenience and confidence for the production factors such as the capital and technology to enter China,but the economic globalization brings another result,that is,the increasing competition in global trade.The founding of the Shanghai Pilot Free Trade Zone is the consideration of this background.The development of the Chinese economy is marvelous after China’s entry into the WTO,and the USA and Japan feel greatly threatened,so they found some new regional rules of trade and service to try to replace the WTO,such as the TPP,TTIP,PSA,all of which are mainly led by USA.The GDP of the twelve countries negotiated with the TPP almost cover 50% in the globe and the content of negotiation in PSA almost involves all the service areas,so China will face a very severe situation of the foreign trade.Once the agreement is in effect,the rules of the international trade and investment will be reenacted,which will constitute a new challenge to the “catch-up” countries,such as China.

China should be open to any agreement which can promote the economic integration and mutual prosperity,and China should be actively take part in them and get the concerned benefit,avoiding being marginalized.In current situation,if China totally rejects the rules which is formulated and led by USA,the process of Chinese economic globalization will be affected,and the dividend of the economic globalization will not be obtained.If China fully accepts the agreements,there may exists some big risk because it means not only a longer period to develop,but also the fact that the benefit will be affected to a great degree.But it is imperative for China to transform and upgrade the economy and integrate with the world,so it is undoubtedly a moderate measure to found a free trade zone to accumulate local experience,and extend certain commerce standard to part of the industry such as the manufacture and service industry if the condition has been reached.If the experiment fails,the negative influence will be limited in a very restricted circle,rather than the overall situation.If the accumulated experience is proved effective and feasible,it can be expanded to realize the fast and sustainable development of the Chinese economy.

That is to say,the rapid development of the economic globalization provides a big background of the times for the founding of the SHFTZ because the free flow of the different production factors,products and services is the general trend.At the same time,the increasing global trade competition urges China to actively integrate with the new rules formulated by USA to get further development in the condition that we are now not able to create the new rules for others.

2.The internal background of founding the Shanghai Pilot Free Trade Zone

The internal background of founding the Shanghai Pilot Free Trade Zone is the demand for further opening-up.As mentioned above,economic globalization is the irreversible trend and the facts prove that any country and district must conform to this trend if they want to obtain the development.If the country and district reject the economic globalization,they will pay a lot,and China is no exception.Meanwhile,the regional trade agreements such as TPP are highly possible to hinder or ban the products made in China and the catch-up advantages,because if you fully accept the agreements,a lot of items about the environment protection,intellectual property rights,labor protection will produce great negative influence upon Chinese economic development.Some rules formulated and led by USA also accord with the developmental laws of the market development and the demands of the upgrading of the world economy,so China should be positive to those rational rules and the content which conforms with the reform direction of the Chinese market economy,such as the free exchange of the currency,reduction of the government interference.China should accelerate the accumulation,upgrade the industry and patterns to establish its competitive advantage,furthermore,to lead the rules of the games.In order to achieve the above-mentioned aims,China should accelerate its own process of market economy reform and actively integrate into the global economy and make use of the catch-up advantages to develop itself,so the establishment of the Shanghai Pilot Free Trade Zone is an important measure of the Chinese government to further reform and open to the world.

What’s more,the financial liberalization target of the SHFTZ can promote the RMB internationalization.Although China now is the world’s second largest economy,the world’s biggest producer and the second largest resource consuming country,China is in a position of disadvantage in the global currency competition,and RMB occupied not more than 3% in the global foreign exchange transactions,and RMB ranks ninth in the active transaction currency in the global market of foreign exchange.We know that the currency occupies a very important role in the formation and transformation of the world economic order,so if we want to improve the position of the Chinese economy in the world economic order,we must improve the international status of RMB.China should accelerate the process to participate in the economic globalization and the RMB internationalization is imperative.After the establishment of the SHFTZ,the concerned financial policies can help the financial allocation optimize and lay a foundation for RMB internationalization.

At the same time,the foundation such as concepts,policies,institutions and materials which are accumulated in the three decades of the reform and opening-up are possessed to lay a foundation for further reform and opening-up.

3.Shanghai as the location of the SHFTZ driven by the economic localization

Firstly,it was determined by the location of Shanghai in the economic and political landscape of China.On the one hand,after three decades of the reform and opening-up and the participation in the globalization,Shanghai has already firmly established its international image and the national status in economy,finance and trade.In the contact with the international society and the global market,Shanghai has already formed the relatively advanced systems and accumulated the concerned experience.On the other hand,Shanghai,with its close connection with the Yangtze River Delta Economic Zone,greatly attracts the arrival and flow of the international production factors such as the capital.Meanwhile,Shanghai can radiate and affect the Yangtze River Delta Economic Zone.Through its radiation effect,demonstration effect and the industrial transfer,SHFTZ can effectively promote the industrial and structural upgrading of this district and improve its degree of marketization and internationalization.

Secondly,the orientation of Shanghai as the world financial center,international trade center,international shipping center and international logistics center set by the State Council needs a proper and veritable carrier.The above-mentioned orientation shows that Shanghai’s important role in leading the development of the Chinese economy,but also the clear requirement for Shanghai’s marketization and internationalization,so the establishment of the SHFTZ,with the trade liberalization,investment liberalization,financial internationalization and administrative simplification as its targets,is the proper carrier.Shanghai possesses all the material foundation,operation experience and regional advantages.

Finally,SHFTZ can strengthen the regional competitiveness of Shanghai not only because of the economic and structural landscape of Shanghai in China,but also the slow-down of the economy in Shanghai in recent years.

Ⅲ.Conclusion

The founding of the Shanghai Pilot Free Trade Zone is an important measure of the reform and opening-up of China,which is also manifested on the China’s determination of participating in the process of globalization on a deeper level.Only actively participating in the process of globalization and playing a constructive role,can China continuously increase her own strength,enhance the status and international influence as a great power.

Firstly,China should firm the belief of participating in the process of globalization through the concepts and policies.The economic globalization is a trend,making the production socialize and increase the degree of interdependence on each other,making the barrier to prevent the production factors from flowing in the world reduce and cut,meanwhile,the global economic operation rules come to be perfect and the global productive forces is continuously improved.Because of the historical and realistic reasons,the western developed countries is still the biggest winner of the economic globalization.Although the economic globalization exacerbates the further marginalization of the less developed countries and economies,it is still an irreversible historical trend and any countries in the world can not reject it out of the door,which has already proved by the process of Chinese reform and opening-up.

Secondly,China should narrow the gap with developed countries through deep participation in the the process of globalization at the aspects of investment,division of labor,trade and finance to increase and stabilize the global connection to develop itself.On the other hand,we should go out to invest abroad to participate in the international division of labor and enlarge the foreign market to enhance the Chinese economic competitiveness.China should narrow the gap by constructive engagement in the operation and perfection of different mechanisms.What’s more,in the era of globalization,with the wider channel of global connection,China should continuously increase the connection and make them stable,which is a kind of reflection of participation in the globalization.

Thirdly,China should actively participate in and create international regimes and institutions so as to increase China’s international discourse power,contributing for the international peace,stabilization and development.To achieve that,China should firstly pay attention to the relationship with the world,especially with USA.Only in a stable state,can the country effectively take part in the management of the world affair.Then,China itself should be stable,including the political,social stabilization and the continuity of policies.Considering China’s economic aggregate and the influence on the world,the stable and developing China is the great contribution to the stabilization and development of the region and the globe.Under the premise of a stable China and a stable relationship with the world,especially with USA,China should actively participate in and create international regimes and institutions so as to increase China’s international discourse power in the international stage.

Notes:

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About the author：Zhu Shilong(1976—),a teacher in the College of Marxism of Changzhou University，PhD,executive deputy editor-in-chief in the Journal of Changzhou University(Social Science Edition),director in the Research Center of City Diplomacy of Changzhou University.

〔*〕Phased achievements of research project of philosophy and social science in universities of Jiangsu province in 2015 “international morality leadership research in the global governance”(2015SJB477).