China's State Council has decided to expand the area of the Shanghai Free Trade Zone (FTZ) fourfold.

It is China's latest move in its FTZ strategies, which are geared at promoting reforms in trade, finance and governance. Guangdong, Fujian and Tianjin also were selected as new FTZs late last month.

Shanghai FTZ, which was created one year ago to explore reforms that can be replicated nationwide, will include three new areas: the Lujiazui financial zone (34.26 sq km), Jinqiao development zone (20.48 sq km) and Zhangjiang high-tech zone (37.2 sq km).

The FTZ's overall area will increase from the current 28.78 sq km to 120.72 sq km.

"The pressure test of new policies and practices explored by Shanghai FTZ will be more accurate in a larger area," said Chen Yin, vice-director of the Shanghai FTZ administration commission and vice-secretary general of the Shanghai municipal government. "Before the expansion, the FTZ's function was comparatively limited. The three new areas will let the FTZ have a complete government framework and administrative system, making its pilot reform have more practical values in the later implementation nationwide."

"As the area with the densest financial factors, Lujiazui can help FTZ better-test reforms in opening up its service sectors and attracting higher-end service industries," said Jian Danian, director of the Lujiazui financial zone administration commission.

The main service industries in Shanghai FTZ are trade and logistics. Although the FTZ attracts some financial agencies, many of them are registered only in the FTZ and set up their offices in Lujiazui, because of limited space in the FTZ.

"Including Lujiazui into FTZ can greatly improve the influence and penetration of FTZ's financial reform, which should not be done in 'warehouses'," said Zhou Qiren, professor of economics at Peking University.

Jinqiao and Zhangjia are national models for advanced manufacturing industries and innovations, respectively. As the Shanghai government is actively building the city into a global innovation center, the government hopes the involvement of Jinqiao and Zhangjiang in the FTZ can help combine its two missions together, promoting innovation and building up the FTZ.

"As part of FTZ, Zhangjiang will initiate more financial innovations, supporting its high-tech innovation," said Chen Ganjin, general manager of Zhangjiang Group, a State-owned enterprise in charge of developing and operating the Zhangjiang high-tech zone. "The convenient trade in FTZ will facilitate the exchanges of innovative factors."

There are also challenges with the expansion.

"With a larger area and more functions, the pressure test of Shanghai FTZ will be upgraded, posing higher requirements for the government's supervision in the government's transformation from a prior approval authority to a maintainer of market order and defender for fair competition," said Gu Honghui, deputy director of the Shanghai development and reform commission, the main economic policymaker of the city.

According to Chen Yin, the FTZ administration commission will construct a big-data-based, supervisory information-sharing platform to make comprehensive use of information scattered in different departments previously.

"The platform has already collected more than 7 million pieces of information from 34 government departments," said Chen. "The information-sharing is the foundation for coordinated actions of the whole government system."

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