China has accomplished a lot over the past four decades thanks to its active expansion and opening-up. The high-quality growth of China's economy in the new era is inseparable from its more open environment.

However, faced with new challenges to deepen reform and achieve high-quality growth, the authorities need to comprehensively implement the institutional innovation measures proposed by the central government, and strive to turn the pilot free trade zones into a new highland for opening-up. Pilot FTZs should, thus, continue to play the role of "experimental fields".

For that, China needs to, first of all, increase the intensity of stress testing among pilot FTZs to ensure they meet international standards on high-level trade and investment liberalization. As an important institutional innovation, the pilot FTZs, explore new ways to deepen reform and opening-up as well as accumulate new experience.

Consider the openness of the foreign investment access management system. China has set up the management model for pre-establishment national treatment plus negative list ever since the China (Shanghai) Pilot Free Trade Zone was established in 2013. This successfully meets international practice in the management of foreign investments. In this context, the number of special management measures on the negative lists have become a key factor toward measuring the level of openness. And the number on the recently released negative list for foreign investment access in China's FTZs is down from 45 to 37 items, indicative of the growing stress testing pilot FTZs are subject to.

However, compared to the rapid increase in international high-level trade liberalization arrangements, the stress testing index of China's FTZs is basically at the same level as the national negative list and falls far behind the Organization for Economic Cooperation's FDI restrictiveness indexes.

Drawing on the experience of international trade liberalization arrangements like Trans-Pacific Partnership agreement, China's FTZs' opening-up commitment should not only cover border issues such as tariffs, non-tariff barriers and investment access, but also the systems and policies concerning post-border issues such as neutral competition of State-owned enterprises, labor and environmental standards, government procurement, and intellectual property protection. However, the stress testing on these aspects is currently very limited, and thus the FTZs cannot play a pioneering role in these areas.

Accordingly, it is recommended that more active opening measures be taken in the pilot FTZs so that foreign investors encounter liberalization standards of high-level trade and investment agreements that are akin to the TPP. Also, there is a need to formulate a new version of the negative list for FTZs at an international leading level, enhance the intensity of stress testing and participate in bilateral and regional multilateral trade and investment liberalization negotiations to accumulate experience for further development.

Meanwhile, pilot FTZs are expected to be granted with more power to independently formulate and implement post-entry industry management regulations and business conduct norms. In addition to a few sensitive and prudent management fields, it is recommended that post-entry management in most industries be subject to tailor-made regulations and laws in the pilot FTZs to address such issues as insufficient decentralization of industry sectors and seemingly open accessibility in some areas.

Second, China should encourage the pilot FTZs to implement differentiated strategies. The unified pilot FTZs' negative list for admittance of foreign investments cannot meet the needs of different local advantages and key industries, which has stood out as a prominent problem in the current practice. Therefore, it is suggested that pilot FTZs should explore diverse paths and create negative lists for investment access tailored to their location; it is suggested that pilot FTZs adjust their own negative lists on the basis of national standards as an important part of the local empowerment reform.

The pilot FTZs can shorten the national negative lists and make local ones based on their own strategic orientation, resource conditions, risk prevention and control experience.

Third, the country should strengthen the "two-wheel drive" function of trade facilitation and investment liberalization. The "two wheels" should play a vital role in promoting institutional innovation and advancing the high-quality growth of cross-border trade and investment in pilot FTZs.

However, given the existing policies and the implementation results, measures on trade facilitation will achieve greater results both in quantity and quality while investment liberalization policies may yield the opposite.

Research has shown that the key for the imbalance lies in small-scale customs supervision areas with limited functions. Specifically, these areas lack an open platform for bonded processing, warehousing, transportation, exhibition, and cargo transfer. Meanwhile, foreign investment in such service industries as medical health, telecommunications, professional services, skills training and marine transportation generally have high import tariffs on equipment and consumables, which in turn lessens the appeal of the FTZs for multinational corporations. In addition, the lack of access to the service industry is accountable for the slow progress in the liberalization of investment.

In response to those problems, China should expand the special customs supervision areas in the pilot FTZs to enhance the level of trade liberalization, enlarge the building of trade and investment liberalization platforms, and focus on the development of cross-border trade such as bonded logistics, warehousing, exhibitions, and paralleled imports of automobiles. Besides, those areas are needed to make transformation and upgrading in accordance with international high-level models and domestic customs standards, and utilize the bonded logistics channels and bonded warehouses to achieve interconnection with one another.

Last but not least, it is necessary to increase policy support for the innovation and development of the trade in services, expand access to service industry investment and welcome cross-border services offered by transnational companies in a localized fashion.

The author is former director-general of the Research Department of Foreign Economic Relations at the Development Research Center of the State Council and chief economist of Development Research Think Tank.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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