Summary

“Taking advantage of China’s 2017 free trade zone (FTZ) program introduced in 15 cities, we adopt the difference-in-difference techniques to evaluate the effectiveness of FTZ policies in encouraging entrepreneurship. Our econometric analysis suggests that they have moderately motivated start-up businesses, evidenced by higher growth of company registrations. The impact was only seen in 2017 but not in any subsequent years. Moreover, the policies haven’t had a clear positive impact on individual firms’ business sizes. The Chinese government hasn’t released any estimation for the costs of FTZ programs, but we expect their economic return to be meager. Therefore, we would suggest not expanding the program further; instead, the government should address the pressing issues that suppress business activities.”