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The Impact of the Pilot Free Trade Zone on Regional Financial Development

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  • Lihui Wang
  • Zhihong Liu
  • Huailong Shi

Abstract

This paper focuses on the Shanghai pilot free trade zone (FTZ). It investigates the effect of the FTZ policy on regional financial development. The synthetic control method employs quarterly data from 2005 to 2019 at the provincial level to investigate counterfactual states before and after the pilot FTZ was set up. First, our results reveal that the Shanghai pilot FTZ had a positive influence on the following four variables proxied for regional financial development: (i) the scale of regional financial development; (ii) the efficiency of indirect financial development; (iii) the efficiency of direct financial development; (iv) the structure of financial development. Second, our results found that the policy effects that began to emerge from 2014 onwards exhibited a steadily increasing trend. As a result, the four proxy variables have increased by (i) 197 percent, (ii) 202 percent, (iii) 9.4 percent, and (iv) 15.2 percent, respectively. That is, the scale of regional financial development and the efficiency of indirect financial development have increased more than the other proxy variables.

Suggested Citation

  • Lihui Wang & Zhihong Liu & Huailong Shi, 2022. "The Impact of the Pilot Free Trade Zone on Regional Financial Development," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(5), pages 154-184, September.
    • Handle: RePEc:bla:chinae:v:30:y:2022:i:5:p:154-184
    DOI: 10.1111/cwe.12441
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    2. Xu, Shiteng & Shen, Ronghua & Zhang, Yahua & Cai, Yifei, 2024. "Fostering regional innovation efficiency through pilot free trade zones: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 356-367.
    3. Li Yang & Irum Shahzadi & Xiaowei Feng & Abdelmohsen A. Nassani, 2024. "Do climate change policies, and environmental regulations affect the financial performance: policy-based analysis in context of green innovation," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(12), pages 32137-32161, December.
    4. Guan, Chenghua & Huang, Jinyuan & Jiang, Ruyue & Xu, Wanting, 2023. "The impact of pilot free trade zone on service industry structure upgrading," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 472-491.
    5. Jiashun Huang & Jim Huangnan Shen & Zhiyan Sun, 2023. "Understanding China's Economic Growth from a Regional Policy Perspective," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(3), pages 1-26, May.
    6. Li, Zhaohua & Pang, Suqin & Zhu, Zhiyun, 2024. "The impact of pilot free trade zones on entrepreneurship: Evidence from a quasi-natural experiment in China," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    7. Ge, Qian-Qian & Liu, Xi-Hua & Zhang, Yu-Chen & Liu, Shi-Qi, 2023. "Has China’s Free Trade Zone policy promoted the upgrading of service industry structure?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1171-1186.
    8. Ting Lei & Ping Xie, 2024. "Fostering Enterprise Innovation: The Impact of China’s Pilot Free Trade Zones," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10412-10441, September.

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