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Navigating Global Economic Dynamics: Institutional Innovation and Rule of Law in China’s Pilot Free Trade Zones

Author

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  • Yang Weng

    (Xi’an University of Architecture and Technology)

  • Wanqiang Li

    (Xi’an Jiaotong University)

Abstract

In the aftermath of the 2008 international financial crisis and amidst a backdrop of escalating trade protectionism and anti-globalization sentiments, China embarked on a strategic journey to vigorously develop Free Trade Zones (FTZs). Positioned as a critical initiative to counter the deteriorating global economic landscape, this research delves into the underlying principles and motivations that drove China’s commitment to FTZs. With 21 established FTZs and a Free Trade Port (FTP) strategically spanning regions across China, the FTZ system has served as an experimental ground for opening up China’s investment and legal systems to the global arena. However, as FTZs progress, conflicts with existing laws and the imperative for system innovation become apparent. This study underscores the paramount challenge of balancing the rule of law with deepening reforms and international economic and trade rules within FTZs. By adopting an interdisciplinary approach that encompasses legal, economic, and geopolitical dimensions, this research provides a comprehensive examination of these complexities. The study identifies the significance of aligning negative list management systems with international standards and proposes strategies, including the introduction of a “China Free Trade Zone Law” and the establishment of FTZ courts, to address challenges and enhance the legal robustness of FTZs. In a broader context, this research contributes to a nuanced understanding of the intricate dynamics enveloping FTZs and their pivotal role in addressing contemporary global economic challenges. It offers theoretical insights into institutional innovation within the context of FTZs and provides practical guidance for policymakers and stakeholders navigating the evolving landscape of global economic governance. China’s FTZs emerge as crucial instruments for economic growth, reform, and international integration in an era marked by multifaceted challenges and opportunities in the knowledge economy.

Suggested Citation

  • Yang Weng & Wanqiang Li, 2025. "Navigating Global Economic Dynamics: Institutional Innovation and Rule of Law in China’s Pilot Free Trade Zones," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 6665-6686, June.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:2:d:10.1007_s13132-024-01783-6
    DOI: 10.1007/s13132-024-01783-6
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