CMG analysis: beyond preferential policy, Free Trade Zones again at forefront of China’s next chapter of opening-up #CMG-pub

July 2025 | While global trade faces headwinds from rising protectionism and trade conditionalities, Beijing continues to follow-through on its decisions from the “Third Plenum” held last July to accelerate opening-up and thereby sending a clear signal in the opposite direction. As CMG has commented earlier, China’s trade policy is not only focusing on driving more integration via bilateral FTAs and regional arrangements but the State Council has for instance also launched a systematic review of Chinese laws and regulations in view of WTO-compatibility in March.

Its latest national-level policy on Free Trade Zones (FTZs) is not a minor adjustment but a proactive and methodical step to reaffirm its commitment to "high-quality opening-up," strategically paving the way for its potential accession to major trade pacts like the CPTPP.

The policy's blueprint is extensive, outlining 77 specific measures across seven critical dimensions, from digital trade and intellectual property to government procurement. Unlike past reforms that often centered on preferential policies like tax breaks, this move is unique in its focus on deep "institutional opening-up"—fundamentally aligning the underlying rules and governance standards with high-standard international trade norms.

Our analysis of the 77 measures reveals a clear and recurring "pilot, replicate, and elevate" pattern. A deeper look shows that the two areas receiving the most intense focus are Digital Trade and Government Procurement, with 15 measures each. Furthermore, while the policy package focuses on scaling existing successes, several of the measures being replicated across all FTZs are particularly noteworthy as they tackle forward-looking and sensitive areas. Key examples include supporting FTZs in formulating "data export negative lists" and promoting the responsible development and application of AI. This strong emphasis on digital governance and procurement transparency further underscores China's strategic preparation for high-standard trade agreements.

This strategic focus on “proactively aligning with international high-standard economic rules” (主动对接国际高标准经贸规则), an entirely new wording coined by the “Third Plenum” in July last year, suggests that the Chinese trade strategy to deal with Trump 2.0 has multiple layers of action.

First, China is seeking to behave as a responsible player that supports global trade, best evidenced by two acts of deliberate rationality to contrast with the White House’s unilateralist approach: first, the halting at 125% of Chinese retaliatory tariffs as a ceiling in the escalation with the US after “Liberation Day” considering the already destructive impacts on businesses, and second, the publishing of a detailed "White Paper on China's Position on Some Issues Concerning China-US Economic and Trade Relations” on 9^th April to accompany China’s imposition of retaliatory tariffs with a pamphlet arguing for mutual benefits of continued bilateral trade .

Second, China wants to accelerate the construction of its bilateral and regional trade integration efforts towards what we at CMG have been calling a “Sino-centric trading network”.

Third, domestic policy efforts seek to align Chinese laws and regulations with WTO rules and high-quality international trade rules such as CPTPP or DEPA. FTZs are now the latest arena of action to implement such high-standard international rules.

With all these layers of action, China is pursuing to make the Chinese economy a “large gravitational field”. This is a term coined by President Xi Jinping and China’s ultimate metaphorical vision of a self-grounded, domestic demand propelled economy that is integrated with global trade but no longer acting as a “world factory”.

In conclusion, CMG suggests to closely track China’s very active trade diplomacy efforts since July last year as well as the ongoing domestic business environment improvements for refining China strategies of European business including on questions of how to use China’s deepening connectivity with third-countries, which is now pointedly happening less with European countries but focusing broadly on a ASEAN-GCC-African Union corridor. Such connectivity can bring new commercial and sourcing opportunities for European MNCs’ China operations plus create collaboration opportunities and higher competitive pressure with and from Chinese firms in these third markets.