Shanghai establish Free-Trade Zone

The State Council has approved the establishment of the country’s first pilot free-trade zone (FTZ) in Shanghai, in what is seen as an essential step towards upgrading China’s economy through the liberalization of services and trade, with an eventual roll-out nationwide in other chosen areas.

Shanghai at night

Shanghai has already established the conditions for setting up an FTZ of almost 29 square kilometers, building on its existing comprehensive bonded zones around Waigaoqiao, Yangshan and Pudong Airport, which are reported to have serviced total trade of more than USD100bn in 2012.


Picture courtesy of Wikimedia: Shanghai’s financial district Pudong

Home to the country’s main stock exchange and the world’s largest port, Shanghai has been at the heart of China’s transformation from an isolated Maoist regime into an economic powerhouse.

Although final details have yet to be announced, while the removal of unnecessary administration and its legal framework is completed and submitted to the Standing Committee of the National People’s Congress, the FTZ (or, as it has been more aptly called, the “free-market area”) will be more advantageous for financial services, trade and investment.

Shanghai is to strengthen its role as a foreign exchange settlement center for international trade, with measures to promote the cross-border use of the renminbi with lessened foreign exchange conversion regulations. For example, bank accounts in the FTZ would be exempt from regulatory control by the Chinese authorities.

While further tax incentives for companies establishing in the FTZ are still to be disclosed, zero customs duties and import taxes will continue to apply to goods transferring between the FTZ and overseas destinations, and domestic merchandise that enters the FTZ is regarded as having been exported, with exporters enjoying an immediate tax rebate.

In addition, there is already an exemption from tax on business income and revenues arising from international shipping, transporting, warehousing, and shipping insurance for companies registered in the FTZ port areas.