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CHINA has suspended approval for new free trade zones because the central government is “not quite satisfied with” proposals of local governments with a frenzy for such zones since the launch of Shanghai’s last year.

“All the application procedures have been suspended, and some local governments have started to reconsider their proposals,” Outlook Weekly, a magazine run by Xinhua news agency, said on Monday, citing an unnamed authoritative source.

The report said the central government is “not quite satisfied with” the plans submitted by the local governments as they sought preferential policies rather than offer institutional innovation.

“The central government aims to explore new methods and accumulate experience by setting up free trade zones as part of an effort to push ahead with reforms and opening-up,” said the source. “But many local governments have misunderstood the purpose (of the zones).”

China uses the FTZ as a testing ground for reforms ranging from wider openness of service sectors to financial liberalization.

Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told the magazine that conditions are not ripe for setting up a new pilot FTZ as the central government is still waiting for Shanghai’s experience with its zone.

The launch of the first pilot FTZ in Shanghai on September 30 spurred more than 20 local governments nationwide, including Guangdong Province and Xiamen in Fujian Province, to seek to open their own FTZ.