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Does the Establishment of Shanghai Pilot Free Trade Zone Promote Yangtze River Delta’s Economic Development?

Author

Listed:
  • Liu Xinhong

    (Universiti Utara Changlun Malaysia)

  • Basah Norliza Hamir

    (Universiti Utara Changlun Malaysia)

Abstract

In September 2013, the Chinese government approved establishing Shanghai Pilot Free Trade Zone (SPFTZ), the first Pilot Free Trade Zone (PFTZ) in the country. SPFTZ mainly implements policy and institutional innovation, aiming to extend reform and opening-up, generate the dividends of reform, serve as a trial for new initiatives, and replicate successful experiences nationwide. To explain the impact of SPFTZ on Yangtze River Delta’s (YRD) Economic Development, this paper chooses annual panel data of 41 cities between 2006 and 2022, verifying economic effect of SPFTZ’s establishment on YRD by constructing a Difference-in-Differences (DID) model. Empirical results indicate that the creation of SPFTZ stimulated YRD’s economic development. Further analysis reveals that SPFTZ fosters regional economic growth by enhancing financial circulation and attracting foreign direct investment (FDI). To strengthen SPFTZ’s development, it is essential to optimize the spatial layout of the zone, grant greater autonomy for reform and innovation, and prioritize financial opening and innovation.

Suggested Citation

  • Liu Xinhong & Basah Norliza Hamir, 2025. "Does the Establishment of Shanghai Pilot Free Trade Zone Promote Yangtze River Delta’s Economic Development?," China Finance and Economic Review, De Gruyter, vol. 14(1), pages 92-112.
    • Handle: RePEc:bpj:cferev:v:14:y:2025:i:1:p:92-112:n:1005
    DOI: 10.1515/cfer-2025-0005
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