Does the Pilot Free Trade Zone Promote the Quality of Urban Economic Growth: An Empirical Research Based on Quasi-Natural Experiment

Abstract

Whether China’s Pilot Free Trade Zone (FTZ) can force market-oriented reforms and improve the quality of economic growth is a major issue related to sustainable development. This paper uses DID method to test the impact of FTZ on the quality of economic growth. The study found that, first, FTZ has promoted the quality of economic growth. Second, FTZ has promoted China’s market-oriented reform through institutional innovation of high-level opening and provided a strong impetus for high-quality economic growth. Third, FTZs in coastal areas, the Guangdong-Hong Kong-Macao Greater Bay Area and the second batch of FTZs have a relatively greater role in promoting high-quality economic growth. Research shows that China’s high-level open institutional innovation can promote market-oriented reforms and effectively promote the goal of economic transformation from high-speed to high-quality.

1. Introduction

Since the reform and opening up, China’s economy has developed rapidly, and its economic aggregate has ranked second in the world. However, the high-speed growth over the years has also brought problems such as low production efficiency and environmental pollution in China [1]. This negative externality of environmental degradation makes China’s past economic development path unsustainable. Therefore, sustainable development is China’s future economic development path.

In order to achieve sustainable economic development in China and adjust the economic development model, it is the important way to transform from high-speed development to high-quality economic growth. The main reason for the low quality of China’s economic growth is the lack of endogenous growth momentum [2,3]. As China’s economy entering the “new normal”, changes in three endogenous structural factors, such as the continuous decline in the rate of capital accumulation [4], the gradual disappearance of demographic dividends [5] and the relative lack of innovation mechanisms [6], have resulted in insufficient endogenous growth momentum and low economic growth efficiency, which in turn affects the quality of economic growth. In addition, flaws in the existing institutional structure, such as excessive government intervention, can also lead to distortions in resource allocation and hinder efficiency improvements [7]. In order to stimulate market vitality and social creativity, China has tried to seek new economic growth points and improve the quality of economic growth through high-level opening up. Among them, the most influential is the Pilot Free Trade Zone (FTZ) established in 2013. As a new highland of China’s reform and opening up, FTZ is a “test field” for China to promote high-quality economic growth through high-level opening up. Therefore, whether the free trade zone can improve the quality of economic growth and then promote sustainable economic development is a common concern of policy makers and scholars. This article focuses on whether FTZ improve the quality of economic growth? If so, what is its course of action? Answering these questions will not only help improve the research on the performance evaluation of FTZ, but also provide theoretical support for China to promote sustainable economic development with a high level of opening up.

China has successively deployed and established 21 FTZs. As part of China’s gradual reforms, FTZ construction has been gradually implemented in batches. The differences in regions and years constitute a “quasi-natural experiment”, which provides an opportunity to study the impact of FTZ on the quality of economic growth. Based on this, this paper takes FTZ as a policy impact to analyze the impact and mechanism of China’s high-level opening up on economic quality. Firstly, based on the overall plan of FTZs in various regions, we analyze the mechanism by which FTZ institutional innovation affects the quality of economic growth from a theoretical perspective; secondly, using the data of 165 cities from 2009 to 2018, Differences-in-Differences (DID) method is used to empirically test the effect of FTZ establishment on economic growth.; thirdly, we further test the heterogeneity effect of FTZ and the mechanism of promoting the quality of economic growth; finally, based on the institutional innovation of FTZ construction, this paper put forward policy suggestions for China to further expand opening up.

2. Literature Review, Policy Background and Mechanism Analysis

2.1. Literature Review

The quality of economic development complements the speed of development and is the key to sustainable development. Its connotation mainly refers to the sustainability of the coordinated development of economy and nature, focusing on economic structure optimization, natural environment protection, and social governance capabilities. The current academic research on the influencing factors of high-quality economic development involves a wide range of dimensions, such as scientific and technological talents, industrial innovation, and the role of the government, but there is a lack of examining the impact of the opening system on the quality of economic development. While promoting foreign advanced technologies to boost the domestic economy, the greater degree of opening to the outside world may also attract polluting investment and have a bad impact on the environment of the host country. Therefore, it is very important to examine the impact of opening-up institutions such as FTZ on economic sustainability.

Among the research literature on FTZ performance evaluation, most focus on the effects of FTZ construction on increasing regional economic aggregates [8,9,10], stabilizing economic growth [11], attracting foreign investment [12,13], increasing trade flows [14,15], enhancing regional innovation capabilities [16], changing trade patterns [17], adjusting industrial structure [18,19]. Few scholars pay attention to the impact of FTZ on the sustainable development of urban economic quality.

2.2. Policy Background

FTZ is an important attempt by China to actively participate in the planning of international trade norms. The establishment of FTZ at the national level is very different from the functions undertaken by various types of development zones in the past [10]. The construction of FTZ emphasizes the exploration of institutional innovation [20,21]. As of October 2020, China has successively approved 21 FTZs. In September 2013, Shanghai FTZ took the lead and formed a series of institutional innovations to deepen reform and opening up. In April 2015, Guangdong, Tianjin, and Fujian FTZs were successively approved, and the reform and opening up was further deepened, forming a differentiated and characteristic opening system innovation result. In March 2017, seven FTZs in Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan, and Shaanxi were listed successively, further expanding the scope of open innovation practice, and based on the regional strategic position, forming more replicable and scalable systems Innovation. In October 2018, the Hainan FTZ was approved to build a FTZ throughout Hainan, explore the construction of a free trade port with Chinese characteristics, and implement high-level opening up with greater efforts and higher standards. In July 2019, Shanghai FTZ implemented capacity expansion based on actual needs and added a new Lin gang area. In 6 August FTZs including Shandong and Hebei were officially listed. In September 2020, the expansion areas of Beijing, Anhui, Hunan FTZ and Zhejiang FTZ were approved. So far, China’s FTZ has formed an all-round layout from point to line, from line to surface, forming an all-round layout of east, west, north, south, middle, coastal areas, and inland connections, and put forward differentiated pilot tasks around regional advantages to create unique reforms and opening up highlands.

2.3. Mechanism Analysis

The institutional innovation of FTZ mainly focuses on promoting the liberalization of investment, the facilitation of trade, and the transformation of government functions. As shown in Figure 1, The institutional innovation of FTZ mainly promotes high-quality economic growth by market reforms.

First, FTZ promotes investment liberalization and improves the quality of regional economic growth. On the one hand, the negative list management system of FTZ will greatly promote foreign direct investment, which will bring greater opportunities for the flow of capital and technical elements in the zone. It is conducive to improving the development level and marketization level of the factor market. On the other hand, by exploring pre-establishment national treatment, FTZ provides foreign-invested enterprises and investors with national treatment that is no less than that of domestic-funded enterprises and investors, improving the degree of marketization and making the market environment more fair and transparent. Therefore, FTZ has improved the degree of regional marketization and the efficiency of factor resource allocation, and promoted the quality of regional economic growth.

Second, FTZ promotes trade facilitation and promotes high-quality development of the regional economy. On the one hand, FTZ actively promotes the innovation of the trade supervision system, improves the transparency and facilitation of international trade, reforms and innovates trade customs clearance links, promotes uninterrupted trade customs clearance and other businesses, and reduces trade barriers. On the other hand, FTZ actively explores and promotes the “single window” of international trade, which provides convenience for enterprises to trace the source of goods, thereby improving the transparency of international trade, increasing the flow of international and trade exchanges, and promoting fair market competition., which will help overcome the inefficiencies brought about by trade protection and promote high-quality economic growth.

Third, FTZ has promoted high-quality economic growth by reforming the government management system. On the one hand, FTZ will improve the administrative management system centered on streamlining administration and delegating powers, and reduce unnecessary administrative approval procedures on the basis of balancing government supervision capabilities and social convenience. As of 2018, Shanghai, Tianjin, Guangdong, Fujian and other FTZs have undertaken, cancelled and adjusted 749, 239, 217 and 279 administrative examination and approval matters respectively. The streamlined and efficient government management system has effectively reduced the operating costs of enterprises, effectively stimulated market vitality and creativity in the production field, improved resource allocation capabilities, and promoted high-quality economic growth.

3. Model Setting, Variable Selection and Data Interpretation

3.1. Model Setting

Before 2019, 11 regions in China listed FTZs in three batches, which provided good conditions for directly using difference in difference (DID) to evaluate the role of FTZ in improving the quality of economic growth [22]. We construct the following two-way fixed-effects model to test the direct impact of FTZ on the quality of economic growth:

$${\mathrm{Pro}}_{it}=\alpha +\beta {\mathrm{FTZ}}_{it}+\gamma X_{it}+{\lambda }_t+{\mu }_i+{\epsilon }_{it}$$

(1)

Among them, pro is the explained variable, which represents the economic quality. The subscripts i and t represent the i-th city and the t-th year. The explanatory variables are FTZ 0–1 dummy variables, ${\lambda }_t$ is the time fixed effect, and ${\mu }_i$ is the city individual fixed effect. $X_{it}$ is other control variables, including the per capita loan balance of financial institutions, the number of higher education schools, the number of government R&D expenditure, and the per capita road mileage. In the above model, $\beta$ represents the net impact of FTZ on the quality of economic development.

3.2. Variable Selection

3.2.1. Explained Variable

We choose labor productivity (pro), the ratio of GDP to total employment, commonly used in the literature, as a proxy for the quality of economic growth [23,24]. Due to the limitations of data availability, only the total urban employment population can be obtained in the statistical caliber at the city level. If the ratio of urban GDP to urban employment population is used as labor productivity, it may underestimate the impact of the FTZ on labor productivity. Effect. Therefore, we revise the calculation of labor productivity by:

$$\mathrm{Pro}\text{\_}\mathrm{fix}= \frac{\mathrm{GDP}}{\mathrm{Urban} \mathrm{employed} \mathrm{population}} \times \frac{\mathrm{urban} \mathrm{population}}{\mathrm{total} \mathrm{population}}$$

(2)

3.2.2. Explanatory Variables

Our core explanatory variable is the dummy variable FTZ. The list of regions listed to build FTZ is based on the official websites of the National Development and Reform Commission and the Ministry of Commerce. According to the actual situation of FTZ construction in each region, if the region is officially listed for construction in the current year, it will be assigned a value of 1, otherwise it will be 0. In some areas, the official listing time for FTZ construction is in the first half of the year, and in some in the second half of the year. We will assign the value of the listing month before June from the current year, and assign the listing month after June from the next year.

3.2.3. Control Variable

We also controlled for other factors that may affect the quality of economic growth, such as government investment, financial development level, human resource level, and infrastructure construction level in each region (By testing, there is no collinearity among the control variables). The government input is represented by government R&D expenditure (gov); the financial development level is measured by the loan balance of financial institutions (fin); the human resource level is selected as ordinary It is measured by the number of colleges and universities (edu); the level of infrastructure construction is measured by highway mileage (fra) and the number of Internet users (inter). In order to reduce heteroscedasticity, this paper takes the logarithm of variables such as government budget expenditure, loan balance of financial institutions, the number of ordinary colleges and universities, road mileage and the number of Internet broadband access users. The descriptive statistics of the variables are shown in

Table 1. Descriptive statistics of main variables.

Variable	Variable Meaning	Mean	Std. Dev.	Max	Maximum	Obs
Pro	labor productivity	18.77	8.76	1.36	97.09	1650
Pro_fix	Revised labor productivity	4.78	5.19	0.19	55.1	1650
FTZ	pilot free trade zones	0.02	0.14	0	1	1650
lngov	Government R&D expenditure	14.58	0.71	12.27	18.24	1650
lnfin	Loan balance of financial institutions	16	1.02	13.67	20.33	1650
lnedu	The number of universities	1.18	0.91	0	4.21	1650
lnfra	Logarithmic highway mileage	6.83	0.88	2.64	9.6	1650
lninter	Logarithmic number of Internet users	3.76	0.92	0	8.55	1650

Source: The author compiled it according to China Urban Statistical Yearbook 2010–2019.

.

4. Empirical Analysis

4.1. Basic Regression Analysis

According to Formula (1), normal labor productivity and revised labor productivity are used as explained variables. The results in

Table 2. Impact of FTZ on the quality of economic growth: basic regression.

	(1)	(2)	(3)	(4)
	Pro	Pro_fix	Pro	Pro_fix
FTZ	3.103 **	4.288 ***	2.393 *	3.817 ***
	(1.396)	(1.191)	(1.362)	(1.078)
lngov			3.919 *	2.314 ***
			(2.165)	(0.555)
lnfin			0.774	−0.751 *
			(1.916)	(0.439)
lnedu			−1.892 *	0.0986
			(1.103)	(0.205)
lnfra			−0.360	−0.323
			(0.580)	(0.200)
lninter			−0.296	0.522 ***
			(0.666)	(0.169)
_cons	15.59 ***	2.896 ***	−45.53	−14.19 *
	(0.248)	(0.220)	(50.48)	(8.481)
Time fixed effect	be	be	be	be
Individual effect	be	be	be	be
Control variable	no	no	be	be
N	1650	1650	1650	1650
R2	0.433	0.433	0.445	0.453

Note: ***, ** and * are significant at the level of 1%, 5% and 10% respectively.

show that FTZ significantly improves the quality of economic growth, and this result holds even after controlling for financial development, human capital, government investment, infrastructure level, and individual characteristics and time effects. This shows that the institutional innovation of FTZ has a positive effect on the efficiency of regional resource allocation, thereby promoting high-quality economic growth. From the perspective of effect, the effect of FTZ on conventional labor productivity is smaller than that of revised labor productivity. To a certain extent, this also confirms the above inference, using the ratio of urban GDP to urban employed population as labor productivity would underestimate the effect of FTZ on labor productivity (Therefore, in the following tests, only the regression results of the corrected labor productivity as the explained variable are reported).

4.2. Dynamic Effects Analysis

Considering that FTZ is gradually promoted and constructed, it has been continuously expanded in scope and continuously improved in institutional innovation. Therefore, the impact of FTZ on the quality of economic growth will also change over time with the implementation of the policy. Therefore, the impact of FTZ construction on the quality of economic growth may have dynamic effects. To this end, we built the following model:

$${\mathrm{Pro}}_{it}=\alpha +{\beta }_k{\mathrm{FTZ}}_{it}^k+\gamma X_{it}+{\lambda }_t+{\mu }_i+{\epsilon }_{it}$$

(3)

Among them, ${\mathrm{FTZ}}_{it}^k$ is the annual dummy variable of the city in the k-th year of building the FTZ (where k = 1, 2, …5). For example, Shanghai started listing the construction of FTZ in 2013, then in 2013, k = 1, the variable ${\mathrm{FTZ}}_{it}^k$= 1, and the remaining years are assigned 0. ${\beta }_k$ measures the improvement effect of institutional innovation on the quality of economic growth after the k-th year of FTZ construction, and $X_{it}$ is other control variables, which is consistent with Formula (1).

According to Formula (3), we examine the dynamic effect of FTZ. The results in

Table 3. Dynamic Effect Test of FTZ on Economic Growth Quality.

	(1)	(2)
	Pro_fix	Pro_fix
After 1	0.424	0.313
	(0.348)	(0.381)
After 2	3.400 ***	2.843 ***
	(0.990)	(0.901)
After 3	6.515 ***	5.931 ***
	(1.555)	(1.479)
After 4	5.770 ***	5.227 ***
	(1.141)	(1.026)
After 5	6.365 ***	5.607 ***
	(0.447)	(0.456)
Time fixed effect	be	be
Individual effect	be	be
Control variable	no	be
N	1650	1650
R2	0.481	0.495

Note: *** is significant at the level of 1% respectively.

show that FTZ has a significant boost to revised labor productivity, and this boost is persistent. Since the establishment of the FTZ in 2013, the State Council has successively issued 6 versions of special management measures (negative list) for foreign investment access. The total number of inventory management measures items has been continuously reduced for five years. The negative list of the 2014 edition was reduced to 139, the negative list of the 2015 edition was reduced to 122, and the negative list of the 2017 edition was gradually reduced to 95. The expansion of construction area and the increasing openness of investment fields will deepen the role of FTZ in improving the quality of economic growth.

4.3. Parallel Trend Test

An application premise of DID is that, before the policy experiment, there is no systematic difference in the development trend of regions with FTZ construction and those without FTZ construction. We draw on the event analysis method adopted by most literature in recent years to decompose the dynamic trend of the economic effects of policies between years [25]. The specific method is to establish the following regression model:

$${\mathrm{Pro}}_{it}=\alpha +{{\displaystyle \sum }}_{j=-M}^N{\beta }_j{\mathrm{FTZ}}_{i,t-j}+\gamma X_{it}+{\lambda }_t+{\mu }_i+{\epsilon }_{it}$$

(4)

Among them, ${\mathrm{FTZ}}_{i,t-j}$ is a dummy variable. If city i starts to build FTZ in period t-j, then this variable is 1, otherwise it is 0 (M and N represent the number of periods before and after the policy time point, respectively). For example, when M = 2 and j = −2, the dummy variable ${\mathrm{FTZ}}_{i,t+2}$ indicates that the city i built FTZ during the period, which measures the effect of the city’s construction of FTZ in the first two years. Therefore, ${\beta }_j$ measures the policy effect in the M period before the construction of the FTZ in city i, and a measures the policy effect in the N period after the construction of the FTZ in the city i.

Figure 2 reports the estimated coefficient of ${\beta }_j$ and its 95% confidence interval, pre2 to pre5 are the policy effects of the first 2 to 5 phases of FTZ construction, current is the current policy effect of FTZ, post1 to post4 are 1 to 4 after FTZ construction, respectively long-term policy effects. Combining with the information in the figure, it can be seen that before the construction of FTZ, the fluctuation space of its estimated coefficient is always around 0, and it is not significant. But after the FTZ is established, the estimated coefficients are significantly positive. It can be seen that before the construction of the FTZ, the difference between the treatment group and the control group is not obvious, so the comparison can be made, and the premise of the parallel trend can be satisfied.

4.4. Robustness Check

It is a very prudent decision that the state approves the construction of an FTZ in which region, and the quality of regional economic growth is also one of the factors considered in its decision-making, which may lead to the self-selection of the quality of economic growth over the FTZ. In order to test the exogenous nature of FTZ and exclude the influence of the interaction between FTZ and the quality of economic growth on the estimated results of this paper, we conducted the following robustness test.

First, the placebo test. In order to investigate whether the effect of FTZ construction is interfered by other non-observed random factors, we refers to Li (2016) and Cantoni et al. (2017) to conduct a placebo test using a non-parametric permutation test [26,27]. The specific methods are as follows: ① Cities with the same number of real experimental groups are randomly selected from the sample as the experimental group, and other cities are the control groups; ② The multi-time point interaction items are set according to the randomly selected experimental group cities and the year of FTZ construction; ③ Keep other control variables unchanged, and substitute the interaction term into the model (1) for regression analysis. Figure 3 depicts the probability distribution of the estimated coefficients of the interaction term with 1000 random samplings. It can be found from Figure 3 that the estimated coefficient values based on random sampling are basically distributed around 0, while the estimated coefficient (3.817) of the benchmark regression is basically outside the coefficient distribution. Again, it shows that the significant promoting effect of FTZ construction on the quality of economic growth is real and not disturbed by other non-observed random factors.

Second, the new control group. Compared with the eastern coastal cities, some western cities still have a certain gap in economy compared with other parts of the country due to poor natural conditions, weak foundation, and late start. Including cities with poor economic level in the sample may be considered to reduce the labor productivity of the control group. In order to ensure the robustness of the selection of the control group, the top 20, top 30, and top 40 corrected labor productivity in the control group were taken as New control group. The regression results in

Table 4. Influence of FTZ on the quality of economic growth: new control group.

	(1)	(2)	(3)	(4)	(5)	(6)
	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix
	The Top 20 Cities Are the Control Group		The Top 30 Cities Are the Control Group		The Top 40 Cities Are the Control Group
FTZ	3.351 **	1.657 *	3.508 ***	1.963 **	3.648 ***	2.394 **
	(1.261)	(0.899)	(1.244)	(0.931)	(1.226)	(0.947)
Time fixed effect	be	be	be	be	be	be
Individual effect	be	be	be	be	be	be
Control variable	no	be	no	be	no	be
N	320	320	420	420	520	520
R2	0.425	0.483	0.421	0.484	0.428	0.482

Note: ***, ** and * are significant at the level of 1%, 5% and 10% respectively.

show that under the new control group, FTZ construction still has a significant positive effect on revised labor productivity.

Third, remove the effect of provincial differences. Provinces and cities that did not build FTZ during the sample window period were excluded to exclude the estimation error caused by the different provinces in the experimental group and the control group.

Table 5. Influence of FTZ on the quality of economic growth: excluding the influence of provincial differences.

	(1)	(2)
	Pro_fix	Pro_fix
FTZ	4.283 ***	3.746 ***
	(1.199)	(1.024)
Time fixed effect	be	be
Individual effect	be	be
Control variable	no	be
N	740	740
R2	0.416	0.447

Note: *** is significant at the level of 1% respectively.

shows the regression results of the sample including only provinces and cities where FTZs are built. Columns (1) and (2) show that after excluding the influence of provincial differences, the basic conclusion still holds.

Fourth, exclude the influence of other policies. A number of literatures show that the construction of national high-tech zones (HTZ) can significantly promote regional economic growth. Because the experimental group has cities that carry out FTZ construction and set up HTZ, in order to eliminate the interference of the establishment of HTZ on the evaluation results, we try to control the HTZ as a dummy variable. The regression results of

Table 6. Influence of FTZ on Economic Growth Performance: Excluding the influence of other policies.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix
FTZ	4.288 ***		4.308 ***		3.817 ***		3.838 ***
	(1.191)		(1.211)		(1.078)		(1.094)
HTZ		0.293	0.368			0.329	0.393
		(0.469)	(0.474)			(0.492)	(0.488)
FTZ_HTZ				4.505 ***				4.032 ***
				(1.212)				(1.099)
Time fixed effect	be	be	be	be	be	be	be	be
Individual effect	be	be	be	be	be	be	be	be
Control variable	no	no	no	no	be	be	be	be
N	1650	1650	1650	1650	1650	1650	1650	1650
R2	0.433	0.369	0.434	0.437	0.453	0.454	0.404	0.456

Note: *** is significant at the level of 1% respectively.

show that after controlling the HTZ, the basic conclusion still holds. In addition, columns (4) and (8) show that the conclusion is still valid after the interaction of FTZ and HTZ variables, and the influence coefficient is greater than the basic regression coefficient, which indicates that the simultaneous construction of FTZ and HTZ is better than only FTZ construction.

5. Further Discussion

5.1. Mediation Test

The theoretical mechanism of the second part shows that FTZ improves the quality of economic growth through market-oriented reform, so we test the intermediary mechanism of market-oriented reform. Use the market index (market) to test the internal mechanism of FTZ affecting the quality of economic growth. The results shown in columns (1) and (2) in

Table 7. Test of the intermediary mechanism affecting the formation of double cycle in FTZ.

	Market (1)	Market (2)	Pro_fix (3)	Pro_fix (4)
FTZ	−0.0615 *** (0.0147)	−0.0725 *** (0.0214)	4.228 ***	3.720 ***
			(1.183)	(1.058)
fiscal			−0.981 *** (0.310)	−1.339 *** (0.351)
Time fixed effect	yes	yes	yes	yes
Individual effect	yes	yes	yes	yes
Control variable	no	yes	no	yes
N	1650	1650	1650	1650
R2	0.498	0.520	0.437	0.461

Note: *** is significant at the level of 1% respectively.

show that the construction of FTZs can significantly improve the marketization index of the region. Therefore, it can be proved that the institutional innovation of the FTZ in the fields of investment, trade and supervision can significantly improve the regional marketization index. The results shown in columns (3) and (4) show that the regional marketization index can significantly improve the quality of regional economic growth, thus demonstrating that institutional innovation in FTZ forces market-oriented reforms, thereby improving the quality of economic growth.

5.2. Heterogeneity Test

From the perspective of strategic goals, there are obvious differences in the development positioning of FTZs in different regions, so the institutional innovation in the construction of FTZs in different regions will also be different. From the perspective of the construction environment, the implementation effect of the innovation system will also be affected by the macro environment. From the perspective of implementation time, there are certain differences in areas where different batches of FTZs are built. Therefore, we analyze the heterogeneity of the impact of FTZ on the quality of economic growth from three perspectives: FTZ development orientation, location distribution, and approval batches.

5.2.1. Developmental Orientation Heterogeneity

From the perspective of the heterogeneity of development orientation, there is an obvious regional orientation on the development orientation of FTZs at the national level. For example, Tianjin FTZ serves the coordinated development of Beijing, Tianjin and Hebei, and Guangdong FTZ further promotes the Guangdong-Hong Kong-Macao Greater Bay Area District construction, Fujian FTZ deepens cross-strait economic cooperation and development, Shanghai FTZ promotes the integration of the Yangtze River Delta, etc. (Peng Yu and Yang Zuoyun, 2020 [10]). Sections (1)–(8) of

Table 8. Influence of FTZ on Economic Growth Performance: Heterogeneity of Development Orientation.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix
	Beijing-Tianjin-Hebei Urban Agglomeration	Yangtze River Delta Urban Agglomeration	Guangdong-Hong Kong-Macao Greater Bay Area	Chengdu-Chongqing Urban Agglomeration	Urban Agglomeration in the Middle Reaches of the Yangtze River	Central Plains Urban Agglomeration	Urban Agglomeration on the West Coast of the Straits	Liaozhongnan City Groups
FTZ	4.601 ***	4.495 ***	9.041 ***	−0.524 ***	2.547 ***	0.0741	2.375 ***	−0.214
	(0.125)	(0.254)	(2.031)	(0.129)	(0.138)	(0.504)	(0.787)	(0.451)
Time fixed effect	be	be	be	be	be	be	be	be
Individual effect	be	be	be	be	be	be	be	be
Control variable	be	be	be	be	be	be	be	be
N	1510	1510	1520	1510	1510	1520	1520	1520
R2	0.538	0.539	0.461	0.529	0.534	0.531	0.536	0.532

Note: *** is significant at the level of 1% respectively.

show the impact of different FTZs on the quality of economic growth in the radiated urban agglomerations. Among them, Guangzhou, Zhuhai, and Shenzhen FTZs (Guangdong-Hong Kong-Macao Greater Bay Area) have the most significant impact, and Tianjin FTZs have the most significant impact. (Beijing-Tianjin-Hebei urban agglomeration) is second, while Luoyang, Kaifeng FTZ (Central Plains urban agglomeration) and Dalian, Yingkou FTZ (central and southern Liaoning urban agglomeration) have not yet shown the effect of the policy.

5.2.2. Location Distribution Heterogeneity

From the perspective of locational distribution heterogeneity, the effect of the establishment of FTZs in coastal areas and non-coastal areas on the quality of regional economic growth is evaluated respectively. The first two columns in

Table 9. Influence of FTZ on Economic Growth Performance: Heterogeneity of Regional Distribution.

	(1)	(2)	(3)	(4)
	Pro_fix	Pro_fix	Pro_fix	Pro_fix
	Coastal FTZ		Non-Coastal FTZ
FTZ	4.818 **	3.615 **	0.233	0.303
	(1.641)	(1.208)	(0.582)	(0.578)
Time fixed effect	be	be	be	be
Individual effect	be	be	be	be
Control variable	no	be	no	be
N	120	120	1530	1530
R2	0.409	0.422	0.510	0.534

Note: ** is significant at the level of 5% respectively.

are the effect of coastal FTZ on regional labor productivity, and the last two columns are the effect of non-coastal FTZ on regional labor productivity. It can be found that FTZ in coastal areas has a significant promoting effect on the quality of economic growth, while the effect of FTZ in non-coastal areas is not significant. The possible reasons are as follows. First, most coastal cities have excellent ports, convenient shipping transportation, and are close to international markets. The reform of the trade system is more likely to play a role; second, most of the non-coastal FTZs began to be listed in August 2016. Construction, due to the lag in the implementation of policies, the treatment effect of institutional innovation may not yet appear.

5.2.3. Batch Heterogeneity

From the perspective of the heterogeneity of approved batches, within the time window of the research sample, three batches were approved to build the FTZ, and the construction time will have different implementation effects. The regression results in

Table 10. Impact of FTZ on Economic Growth Performance: Batch Heterogeneity.

	(1)	(2)	(3)	(4)	(5)	(6)
	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix	Pro_fix
	The First Batch of FTZ		The Second Batch of FTZ		The Third Batch of FTZ
FTZ	5.087 ***	4.495 ***	5.957 ***	5.422 ***	0.230	0.295
	(0.0809)	(0.254)	(1.659)	(1.564)	(0.489)	(0.490)
Time fixed effect	be	be	be	be	be	be
Individual effect	be	be	be	be	be	be
Control variable	no	be	no	be	no	be
N	1540	1540	1580	1580	1590	1590
R2	0.521	0.539	0.442	0.455	0.520	0.538

Note: *** is significant at the level of 1% respectively.

show: First, the first and second batches of FTZ can effectively improve the quality of regional economic growth, while the third batch of FTZ has no significant effect, which indicates that the system-induced changes are relatively slow. Moreover, policy absorption also takes a certain amount of time, and there is a certain lag in policy effectiveness. Second, from a numerical point of view, the second batch of FTZ and the first batch (Shanghai) FTZ have a larger impetus, and this result shows that with the delay of the time of the FTZ example, the impact of FTZ on the quality of economic growth may be somewhat weakening, it is necessary to continuously increase the opening up and deepen the reform of the system and mechanism. It is worth noting that in 2019, the “Overall Plan for the Lingang New Area of the China (Shanghai) FTZ” was announced, and the Shanghai FTZ will expand again, which is also the country’s further consolidation. This is also a manifestation of the country’s further consolidation and deepening of the achievements of opening up to the outside world.

6. Conclusions and Policy Implications

6.1. Conclusions

Under the new normal of the economy, China’s high-level opening-up carries the historical mission of seeking new growth drivers and breaking through the stagnant system, and its impact on the quality of economic growth is particularly important. As a new voyage of China’s high-level opening up, FTZ scientifically assesses the impact of FTZ on the quality of economic growth, to a certain extent, reflects whether China’s current high-level opening up can force market-oriented reforms and effectively promote high-quality domestic economic growth. In view of this, this paper takes the construction of FTZ as a policy impact, and analyzes the processing effect of China’s high-level opening-up institutional innovation on the quality of economic growth, as well as the mediating effect of market-oriented reforms. The study found that: first, the construction of FTZ has significantly improved the quality of regional economic growth, and the improvement effect is robust; second, the test results of the intermediary mechanism show that the FTZ promotes domestic market-oriented reform through high-level open system innovation, and ultimately promotes the quality of regional economic growth; third, the heterogeneity analysis shows that FTZs in coastal areas, the Guangdong-Hong Kong-Macao Greater Bay Area and the FTZs built in the second batch have a greater role in improving the quality of economic growth.

6.2. Policy Implications

The first is to further open up to the outside world, innovation of FTZ can effectively inject market vitality into the Chinese economy, generate more economic growth points, and provide a strong impetus for sustained high-quality economic development. The establishment of a negative list management mechanism and pre-establishment national treatment has gradually achieved its own rise in the global value chain while deepening its participation in the international division of labor, sharing the trade dividends brought by economic globalization. Therefore, it is necessary to continue to shorten the negative list, especially shorten the negative list of the service industry, expand the opening of the service industry to the outside world, and further promote the sustainable development of China’s economy.

Second, continue to promote domestic market-oriented reforms and optimize the business environment. On the one hand, market-oriented reform is conducive to improving the development of factor markets and product markets, building a higher-standard market-oriented system, and forming a more complete resource allocation mechanism, thereby promoting market vitality and new growth drivers, on the other hand, the adaptability of government functions and market mechanisms can solve deep-seated institutional and mechanism problems, thereby improving the efficiency of resource allocation and promoting high-quality economic growth.

Third, FTZ should build heterogeneous open institutional innovations in areas such as non-coastal areas where the policy effect is not obvious. Non-coastal areas and coastal areas have differences in the way of national trade exchanges, so the measures to promote trade facilitation should also reflect the corresponding differences, so as to give better play to the location advantages of non-coastal areas. In addition, the policy effects of the third batch of pilot free trade zones have not yet appeared, which to a certain extent indicates that in the process of exploration and construction in the future, pilot free trade zones should focus on a higher level, deeper and wider opening. In June 2020, the “Overall Plan for the Construction of Hainan Free Trade Port” was released, demonstrating China’s firm determination and confidence in deepening reform and expanding opening up in the new era.

6.3. Study Limitations

There are still many deficiencies in research. First, due to the lack of data, it is impossible to fully test the policy effects of each institutional innovation in the FTZ. Second, since the policy evaluation in this paper is an ex post evaluation, it is mainly based on policy effects and theoretical derivation to explain the reasons, which may not be comprehensive enough.