Policy Instruments for Inclusive and Sustainable Development: Empirical Insights from China’s Pilot Free Trade Zones

Promoting sustainable and balanced economic growth remains a key challenge for developing countries. This study empirically investigates the impact of China’s Pilot Free Trade Zone (PFTZ) on regional economic growth from 2010 to 2023, offering important insights into how targeted policy instruments can contribute to sustainable economic growth. Employing a multiperiod difference-in-differences model and a capital–technology–marketization framework, this study finds that PFTZ implementation has a significant and direct influence on promoting provincial economic growth. The growth effects are primarily driven by improved capital flows and enhanced technological innovation. Notably, these positive effects are more pronounced in central and western Chinese provinces and regions with lagging economic development, indicating that PFTZs can serve as effective tools for reducing regional disparities. These findings provide new empirical evidence regarding the regional heterogeneity of PFTZ policy impacts and offer valuable insights into the design, timing, and spatial targeting of PFTZ initiatives in developing countries seeking to support inclusive and sustainable development across the country.