China Scales Up Institutional Reforms with Nationwide Expansion of Shanghai Free Trade Zone Practices
On June 13, 2025, the State Council convened an executive meeting to advance the replication and promotion of reform measures piloted in the China (Shanghai) Pilot Free Trade Zone. The decision is a strategic move to broaden the impact of institutional innovation and further integrate international high-standard economic and trade practices into China’s regulatory framework.
Background: Shanghai as a Testing Ground for Reform
In December 2023, the State Council released a comprehensive plan outlining 80 reform measures aimed at enhancing institutional openness within the Shanghai Free Trade Zone. These measures spanned seven core areas, including liberalization of trade in services, improved facilitation of cross-border flows, and enhanced administrative efficiency. Over the past year, implementation of these reforms has generated a set of mature, scalable practices contributing to improved regulatory transparency, trade facilitation, and investment access.
Policy Expansion with Emphasis on Institutional Openness
The recent State Council meeting highlighted the need to transform successful practices from the Shanghai FTZ into policy models that can be applied nationwide. The effort focuses on aligning more closely with international regulatory norms, thereby supporting China’s strategic objective of expanding high-level institutional opening-up.
This initiative is intended to deliver broader access to the benefits of reform by standardizing effective mechanisms across regions. The approach seeks to increase the overall efficiency of administrative systems, foster innovation, and strengthen China’s integration into global trade and investment systems.
Implementation with Local Adaptation
Authorities across different regions are expected to implement the pilot measures in a manner tailored to their specific local conditions. This includes prioritizing policies that directly address the needs of enterprises and citizens, while also ensuring consistency with broader national reform agendas.
The implementation strategy places strong emphasis on coordination between pilot programs and other reform initiatives, ensuring that reforms are harmonized and that policy measures are mutually reinforcing. Risk mitigation remains a central requirement, especially as reforms touch upon sensitive areas such as cross-border flows and regulatory autonomy.
Deepening Reform in a Controlled Environment
Institutional experimentation is encouraged, but within clearly defined risk parameters. A focus on stress testing and scenario planning is essential to ensure that opening-up measures do not compromise financial or regulatory stability. This phase of reform requires a careful balance between openness and control, reinforcing the need for regulatory preparedness as new policies are adopted more broadly.
Supporting Dual Circulation and Market Integration
The policy agenda also reinforces China’s dual circulation strategy, which aims to strengthen domestic economic foundations while deepening international connectivity. Expanding the reach of successful free trade zone practices is expected to improve the efficiency of domestic markets, attract foreign investment, and facilitate trade flows under globally recognized standards.
By fostering closer linkages between domestic and international markets, the replication of FTZ measures contributes to the long-term goal of building a more open, competitive, and modern economic system. The initiative also positions China to better participate in global value chains by enhancing its institutional infrastructure.
Conclusion
The decision to scale up practices from the Shanghai Free Trade Zone marks a significant phase in China’s reform trajectory. By promoting proven institutional innovations on a national scale, the State Council aims to accelerate systemic modernization and regulatory convergence with international standards. The success of this strategy will depend on local execution, policy coordination, and the ability to maintain stability while pursuing transformative change.