From Policy Incentives to Institutional Rules: The Historical Path of Institutional Opening-up in the Shanghai Pilot Free Trade Zone

다국어 초록 (Multilingual Abstract)

Research topics: This paper argues that the Shanghai Pilot Free Trade Zone should be understood within the historical process through which China’s opening-up has shifted from policy-driven opening-up to institutional opening-up. Institutional opening-up centers on the construction of rules, standards, and regulatory procedures. This shift requires a governance pathway that can manage risk under uncertainty, enable policy trial and error, and support the replication and scaling of successful experience. Through the evolution from special economic zones to comprehensive reform pilot zones and then to pilot free trade zones, China’s pilot system gradually developed an experimentation mechanism oriented toward risk minimization. This mechanism has allowed institutional opening-up to take root in Shanghai as concrete rule building and institutional supply, while also bringing questions of rule-making authority to the fore.
· Research background: As competition over international economic and trade rules has intensified and China’s domestic development model has undergone adjustment, the traditional opening-up model characterized by preferential policies and factor facilitation has increasingly revealed problems such as policy fragmentation and weak predictability. China’s approach to opening-up has therefore shifted toward institutional opening-up centered on rules, standards, and regulatory procedures. Against this backdrop, the Shanghai Pilot Free Trade Zone has become a key institutional arena for observing how this shift is implemented in practice.
· Differences from prior research: Existing studies on pilot free trade zones largely focus on cataloging policy measures or assessing economic effects, and provide less explanation of how these zones function as institutional devices in the shift in China’s opening-up strategy. This paper instead highlights how the risk-minimizing experimentation mechanism that emerged through the evolution of the pilot system carries the rule agenda of institutional opening-up. The Shanghai case is used to illustrate the concrete process through which the pilot mechanism and institutional opening-up are coupled.
· Research method: This study combines an interpretive case study with process tracing.
· Research results: The study finds that the key significance of the Shanghai Pilot Free Trade Zone lies not in the intensity of preferential treatment, but in the way the pilot mechanism offers a controllable pathway for advancing institutional opening-up. Under conditions of uncertainty, pilots enable risk control, trial-and-error adjustment, and the diffusion of experience, allowing institutional opening-up to be translated into executable rule arrangements and institutional supply in specific domains.
· Contribution points and expected effects: The paper contributes a mechanism-based explanation of how China’s shift in opening-up is realized in practice. It shows how the coupling of the pilot mechanism and institutional opening-up in the Shanghai Pilot Free Trade Zone produces institutional implementation and diffusion effects, thereby strengthening the linkages among research on pilot free trade zones, pilot governance, and institutional opening-up.