Free Trade Zone refers to a specific class of special economic zone. It is a geographic area where goods may be landed, stored, handled, manufactured, or reconfigured, and re-exported under specific customs regulation and generally not subject to customs duty. So far, China has established 4 Free Trade Zones in China, covering Shanghai FTZ, Guangdong FTZ, Tianjin FTZ and Fujian FTZ as main ways.
1. About Shanghai FTZ
Since it was established on September 29, 2013, the China (Shanghai) Pilot Free Trade Zone (FTZ) has carried out institutional reform and innovation in areas of investment, foreign trade, finance and post-filing supervision to form a legal framework for investment and trade within the zone.
Scope of Implementation:
China (Shanghai) Pilot Free Trade Zone comprises four areas under the special administration of Customs -- Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Free Trade Zone. The entire zone covers a combined 28.78 square kilometers.
Regional Advantage:
Financial – Foreign banks will be able to establish WFOE or majority-controlled subsidiaries within shorter time frames. The financial institutions are expected to progressively be granted licenses for cross-border financial products. The promotion of renminbi convertibility and relaxed administrative controls will greatly facilitate treasury cross-border fund management for companies – financial and non-financial alike – with regional headquarters in China. Different than other bonded areas, the biggest feature of FTZ is the special custom monitoring system called ‘Domestic but out of Customs’, which means ‘open the A line (Free Trade Zone and boarder line) and control the B line (Free Trade Zone and Non Free Trade Zone)’. This expedited clearance of goods and materials is beneficial in terms of cost and time for logistics companies specifically.
Customs – Overseas shipments will not need customs clearance until a later stage, simplifying the operation of logistics companies within the FTZ. Reducing costs and complexities involved in the logistics could further encourage international manufacturers to set up a regional manufacturing and logistics hub in Shanghai.
Administrative – An important reform which will attract foreign investors is a drastic simplification of the administrative burden of applying for approval and registration within the FTZ. Foreign investors within the zone will be subject to the same application procedure and requirements as domestic investors and the process will require a single application at a single location, provided their business scope is not contained within the “Negative List” for which special approval is needed.
Competitive regulatory and tax environment – new tax policies are being adopted to support innovative business models. Firms may choose to pay Import taxes that apply to imported components, or the Import taxes applying to the finished components.
2. About Guangdong FTZ
China (Guangdong) Pilot Free Trade Zone (hereafter referred to as GDFTZ) was formally approved by the State Council and established on 31 December, 2014.
Scope of Implementation:
It is set at 116.2 km² and covers three areas: Nansha Area of Guangzhou, a 60 km² district (incorporates 7.06 km² of Guangzhou’s Nansha Bonded Port Area); Qianhai & Shekou Area of Shenzhen, a 28.2 km² district (incorporates 3.71 km² of Shenzhen’s Qianhai Bay Bonded Port Area), and Hengqin Area of Zhuhai, a 28 km² district.
Strategic Positioning:
Depend on Hong Kong and Macao, serve the mainland and face the world, GDFTZ is to become an demonstrarive area for deep collaboration between Guangdong, Hong Kong and Macao, a crucial hub of 21st century’s maritime silk road and pilot area for next round of economic reforms nationwide.
Development Targets:
Through three to five years of experimental reforms, to cultivate a legal, market-oriented and internationalized business environment, establish a new open economic system, realize deep economic integration between Guangdong, Hong Kong and Macau, form a new competitive edge in international economic cooperation, strive to be a pilot free trade zone with legal environment norms in line with high international standards, investment and trade facilitation, exceptional driving force in the area as well as safe and highly efficient regulation.
Division of Functions:
Nansha Area of Guangzhou will prioritize shipping logistics, special finance, international trade, high-end manufacturing and other industries, to be established as a new modern industrial base with manufacturing service industry as the focus, and a world-leading comprehensive service hub.
Qianhai & Shekou Area of Shenzhen will prioritize finance, modern logistics, information services, science and technology services and other strategic emerging service industries, to be established as an experimental window to the world for China’s financial industry and become a significant base for global service trade and a international hub port.
Hengqin Area of Zhuhai will prioritize tourism, leisure and health, business financial services, culture, science, education and high tech, and other industries, to be established as an area of open and leading culture and education, and a leisure and recreation base for international commercial services, as well as create a new carrier that promotes appropriate and diversified economic development in Macao.
3. About Tianjin FTZ
China (Tianjin) Pilot Free Trade Zone (TJFTZ for short) is a regional free trade zone, covering a total area of 119.9 km2, and consists of three areas, Tianjin Port Dongjiang Area, Tianjin Airport Area and Binhai CBD Area.
Strategic positioning:
In accomplishing the core task of institutional innovation and meeting the essential requirement of replicability and applicability, TJFTZ is striving to become a high-level open platform for the coordinated development of Beijing-Tianjin-Hebei region. This is a pioneering area for reform and opening-up and a test field for institutional innovation throughout the country. It is also a highly developed free trade zone ready to embrace the world.
Development Targets:
With extensive reform and explorations in next three to five years, TJFTZ will be built into a top notch free trade zone featuring unrestricted trade, facilitated investment, clustered high-end industries, high-quality financial services, sound legal environment, efficient and effective regulations, as well as other impressive benefits.
4. About Fujian FTZ
Fujian Pilot Free Trade Zone was approved to set up by the State Council in December 31, 2014. It started operation in April 21, 2015, covering an area of 118.04 square kilometers with Fuzhou Area of 31.26 square kilometers, Xiamen Area of 43.78 square kilometers, and Pingtan Area of 43 square kilometers, as one of four pilot free trade zones in China (the remaining three are settled in Shanghai, Tianjin, Guangdong).
Strategic positioning:
Focuses on the strategy of considering cross-strait demand, serving the country, opening to the world, the free trade zone is expected to be built as a test bed for reform and innovation, a demonstration area to deepen cross-strait economic cooperation, and the core area of 21st Century Maritime Silk Road.
Development goals:
With three to five years of reform and exploration, we strive to build a free trade zone with complete investment and trade facilities, effective financial innovation, sound service system, efficient and convenient supervision, legal and standard environment.
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