Ancient-style architecture in downtown Chongqing forms a sharp contrast with modern buildings on the other side of the Jialing River that runs through the city (WEI YAO)

A suburban industrial park closed off with customs checkpoints is an unlikely site for a gallery. But this is where Zhang Hang, a 38-year-old entrepreneur, has based his art company in Chongqing, a metropolis in western China with a population of more than 30 million.

The Hongyi Jiuzhou International Culture and Art Development Co. Ltd., founded in the Xiyong Area of the China (Chongqing) Pilot Free Trade Zone (FTZ) in May 2017, deals in artwork and cultural exchanges. Its exhibition halls feature items ranging from embroideries and stone sculptures created by local handicraft makers to oil paintings by Italian, British and French artists.

Zhang, who hails from Guangdong Province in the south, has been doing business in Chongqing for more than 10 years. "When I decided to pursue my career in Chongqing, my friends could hardly understand my choice," Zhang said. "Now they envy me for foreseeing business opportunities in the western region."

Launched 40 years ago and expanding from coastal regions to the hinterland, China's reform and opening-up program continues to advance—and Chongqing has been experiencing its benefits. The FTZ there, inaugurated in April 2017, has supercharged the city's progress. Zhang's company is one of many poised to make the most of the potential Chongqing offers.

Exploring new realms

Zhang chose Xiyong for the good reason that foreign goods, including art, can enter the Xiyong Comprehensive Bonded Area, part of the FTZ, and be warehoused there without paying import duty. Only when items are purchased by domestic buyers and transported out of the area will customs clearance procedures start.

Hongyi Jiuzhou is the first platform in western China and the third nationwide where cultural products are traded in a bonded area, notes Zhang. The other two are in Shanghai and Beijing.

Also, under the FTZ's policy on trade in cultural products, imported artwork can be taken out of the bonded area for exhibitions in Chongqing and elsewhere tariff-free. If not for this FTZ policy, exhibitors would be obligated to undergo a daunting array of administrative procedures.

The company also plays a role in introducing Chinese art overseas. It regularly conducts exchanges with foreign cultural institutions and is therefore able to help local Chongqing artists, artisans and cultural heritage practitioners promote their work internationally.

In September 2017, Hongyi Jiuzhou showcased nearly 500 pieces of artwork in Paris. It was the first in a series of cultural exchange events to be held in countries involved in the China-proposed Silk Road Economic Belt and 21st-Century Maritime Silk Road Initiative, popularly known as the Belt and Road Initiative. The next exhibition will be in Russia.

From April 2017 to June 2018, 16,985 new enterprises registered in the FTZ, according to the Chongqing Municipal Commission of Commerce (CMCC), more than in the previous three years.

For enterprises, the FTZ's appeal lies in easier access, fewer restrictions and greater policy support, said Liang Ming, deputy director of the Coordination Division of the CMCC. These are the precise aims of the FTZ's reforms and innovations.

Apart from streamlining administrative procedures, Chongqing has other—greater—ambitions. In particular, it is trying to rewrite the rules of international railway cargo transportation. Letters of credit (LOCs) issued by local banks guarantee overseas sellers full payment and are widely used in shipping, thereby relieving the financial burden on importers. But banks are reluctant to issue LOCs for cross-border railway transportation since, unlike shipped cargo which is delivered directly to a destination, railway containers are transported by trains of different countries along the way.

Chongqing is exploring a new method whereby a transportation agency takes responsibility for cargo safety, and the railway station of entry ensures that the goods are released only after the LOC-issuing bank has received payment from the importer. With these assurances, a bank in Chongqing issued the first LOC for railway cargo in March.

Liang believes this new arrangement can facilitate international trade and can be applied elsewhere. Were it to become widely used, he said, the city would negotiate to make it an international practice.

Five years of enterprising and pioneering work in the country's pilot FTZs has seen major progress and breakthroughs in institutional explorations, President Xi Jinping recently said. He urged further efforts to develop pilot FTZs to generate institutional innovations that could be widely adopted.

China established its first pilot FTZ in Shanghai in 2013. There now are 12 pilot FTZs across the country, with the government exploring new ways to facilitate trade and investment. Innovations that prove successful will be copied and employed on a larger scale, even nationwide, in the spirit of promoting reform and opening up.

Industrial evolution

Situated on the upper reaches of the Yangtze River, Chongqing is the only municipality in western China that is directly under the administration of the Central Government. Covering 32,000 square miles, it is five times as large as Beijing. Its population is also larger than that of the other three municipalities—Beijing, Tianjin and Shanghai.

Chongqing has sought to boost development by promoting the manufacturing industry and building links with other parts of the world, Liang said. In recent years, a number of leading laptop manufacturers have set up shop in Chongqing, making it the world's largest laptop manufacturing center. HP and Foxconn, the world's largest contract manufacturer of electronics devices, established a presence in the city in 2009, followed by other leading brands like Acer.

To help these companies export their products, Chongqing created cargo train routes to Europe. Today, these railroads are part of the China-Europe freight rail service network, a flagship project under the Belt and Road Initiative.

After the first Europe-bound container train chugged out of Chongqing in March 2011, a number of other cities followed suit. In a recent count, there were 65 routes to 44 cities in 15 European countries.

The number of trains departing from Chongqing has grown steadily over the years and is soon estimated to exceed 3,000. These trains transport cargo from around the country, with those originating in Chongqing accounting for 30%.

In addition to logistics corridors, Chongqing found that it needed areas with special customs policies to boost the growth of export-oriented laptop manufacturers. This led in one instance to the creation of the Xiyong Comprehensive Bonded Area, where manufacturers can assemble imported parts without paying tariffs.

Newly emerging industrial areas have transformed Chongqing's countryside. A new urban center is being created in its western suburbs, which encompasses the Xiyong Comprehensive Bonded Area, Xiyong Micro-Electronics Industrial Park and Chongqing Logistics City, where the China-Europe freight train terminal is situated and which is home to a host of logistics companies, as well as a university town.

"Our industrial park was born in light of the need to develop logistics," Gu Xin, an official with Chongqing Logistics City, said. "However, as it keeps expanding, we aim to build it into a modern community with diverse programs, including commercial and cultural services, to meet the needs of the IT companies and universities in nearby areas."

The FTZ incorporates Chongqing's current industrial zones and provides a platform for the city to seek new ways of opening up, Liang said.

The city's advanced transportation infrastructure is one of Chongqing's major assets in an initiative to create an inland FTZ, according to Liang. The city is expanding its transportation network, eyeing a new transportation corridor to Southeast Asia. An emerging network exploiting cargo routes to Europe and Southeast Asia will help it play a pivotal role in international trade.

The new land-sea transit route is part of the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity signed in 2015. The route runs through Chongqing, Guangxi Zhuang Autonomous Region, and the provinces of Guizhou, Gansu and Qinghai, and is more cost-efficient than conventional marine routes.

"As processing industries relocate to Southeast Asian countries in the wake of rising labor costs in China, the network will provide clothing manufacturers in Vietnam and Malaysia with easy access to raw materials and markets," Liang said.

While the FTZ presents opportunities, one obstacle is a shortage of highly trained workers, Liang said. Compared with the eastern region, Chongqing suffers from a brain drain and a dearth of both technology-savvy professionals and those versed in international laws and regulations.

Chongqing's traditional major industries of laptop and auto manufacturing are showing signs of slowing down. It is time for the city to transition to higher ends of the industrial chain by introducing sophisticated technology like smart manufacturing, Liang said. But without a sizable pool of skilled workers from which to draw, industrial upgrading will advance only slowly.

Education offers a solution, noted Liang, who is calling for new colleges to nurture the badly needed talent.