The Trade Effects of Strategic Liberalization: A Synthetic Difference-in-Differences Analysis of the Xinjiang Free Trade Zone

This paper delivers the first rigorous assessment of China’s Xinjiang Pilot Free Trade Zone (PFTZ) by integrating the Synthetic Control Difference-in-Differences design (SDID). Using a monthly panel of import and export data for 30 provinces from January 2020 to March 2025, we construct a “synthetic Xinjiang” via optimally weighted donor regions and time periods. SDID estimates indicate that, within eighteen months of launch, Xinjiang’s exports rose by 64.1 percent relative to its synthetic counterpart, while imports showed no significant change. An event-study analysis reveals that export gains appear immediately after implementation and accelerate through early 2025. Sectoral heterogeneity tests show the largest uplifts in labor- and resource-intensive industries (e.g., precious metals, wood, leather), and reveal that energy-rich emerging economies disproportionately drove export growth. Robustness checks—employing alternative donor pools, sample windows, and comparisons with traditional SCM and event-study estimators—affirm our findings and highlight SDID’s strengths when pre-treatment matches are imperfect. The results suggest that inland FTZs can swiftly reshape regional trade patterns. We conclude with policy implications for border-trade facilitation, tariff-rebate schemes, and cross-border logistics optimization, and offer methodological guidance for future quasi-experimental evaluations.