Path of exploration

As a special economic zone, Lingang should undertake more experiments in institutional arrangements, improve weak links and explore new development paths, municipal government officials said at an executive meeting in late July.

It should also take on more special functions and further improve institutional mechanisms to attain these goals, they added.

Chen Jinshan, director of the Lingang Special Area Administration, said the zone will seek more institutional innovations by aligning itself with high-standard international economic and trade rules. Chen cited as examples the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement.

Lin-gang will also conduct more "stress tests" — experiments to test how far the reform can go by including possible challenges and difficulties — on cross-border data, cross-border finance, value-added telecommunications and high-level shipping, he said.

One stress test has already been conducted this year on cross-border data flow in the connected cars, mutual funds and biomedicine sectors, and released in May.

Companies registered in Lingang, or other areas of the Shanghai FTZ, can apply for general data cross-border flow services in 11 scenarios specified on a list. However, the data transfer activities must be conducted within Lin-gang.

US carmaker Ford has benefited from the new list, which is the first of its kind in China. Wu Ji, head of information security and data compliance at Ford China, said if one of its cars sold in China needs maintenance, the company needs to transfer the vehicles' information back to its global headquarters to get technical support.

The new list classifies global aftersales services under the cross-border data flow scenario. This means Ford can now provide these services more conveniently, Wu said.

Shen Yi, a professor of international politics at Fudan University, said the list was "down-to-earth and elastic", and stressed its importance to stimulating economic growth. "Cross-border data flows are now a prerequisite for industry development," he said.

"But the compliance cost for such activities cannot be overwhelming for companies. The new list, which is quite exceptional from a global perspective, has provided a list, with limits, that will meet economic development needs because it is based on real business scenarios," he said.

It is also important that Lin-gang was chosen as the location for such an experiment, Shen said.

"Risks cannot be completely avoided while seeking economic development," he said. "The solution is not to eliminate risks, which is impossible, but to strike a balance between development and security, and control risks within a tolerable range."

When it comes to cross-border data flow, no institution, regulatory body or company can come up with a ready-made solution. Also, technologies and application scenarios evolve and upgrade rapidly, Shen added.

The list rolled out in Lin-gang is a realistic solution, he said. "It is through experiments, and maybe mistakes, that progress can be made," Shen said.

A second list covering insurance and shipping will be released in August, said Chen from the Lingang Special Area Administration.