Does the Establishment of Pilot Free Trade Zones Improve the Efficiency of Financial Services for the Real Economy? Empirical Evidence from Four Pilot Free Trade Zones in Shanghai, Tianjin, Guangdong, and Fujian

Abstract

In the process of the high-quality transformation and development of China’s economy, one of the issues that needs to be resolved is how to strengthen the ability of finance to serve the real economy and improve the efficiency of financial operations. Pilot Free Trade Zones (PFTZs), highlands of institutional innovation, have played the role of a natural testing ground for China to deepen its financial supply-side reform and improve the efficiency of financial services in the real economy. On that premise, this paper discusses the policy effects and transmission channels for the financial reform of PFTZs to improve the efficiency of financial services in the real economy within China. The findings of the papar are the followings, (1) The reform of PFTZs has significantly improved the efficiency of finance in the real economy, having even achieved a sustainable effect. That is to say, with the extension of the duration of free trade zone construction and the gradual implementation of financial reform measures, the regional impact of financial services in the real economy has shown a year-on-year upward trend. (2) The effects of financial agglomeration, financial transparency, and optimization of financial infrastructure produced by the reform of PFTZs have played a significant regulatory role in the process of improving the efficiency of financial services in the free trade zones. (3) The effect of China’s financial reform on PFTZs has fostered noticeable regional diversity; an important reason for the diversity of policy effect rests with the difference in transmission mechanisms. The conclusions of this paper expand the research dimension of the literature evaluating the effect of policy on PFTZs, and provide policy references from the perspective of financial reform in the free trade zones for China to further deepen financial supply-side reform and improve the efficiency of financial services in the real economy.

Keywords

Pilot Free Trade Zones (PFTZs) / finance serving the real economy / financial openness / differentiated exploration

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