Following the State Council’s decision last September to construct three new FTZs in Beijing, Hunan, and Anhui, as well as enlarge the current FTZ in Zhejiang, China now has 21 pilot free trade zones (FTZs) dispersed across the country.
Vice Commerce Minister Wang Shouwen said in the announcement that the new batch of pilot FTZs showed China’s “strong determination to accelerate the establishment of a new development pattern through a higher level of opening-up.”
FTZs are government-designated zones where a variety of test policies can be implemented. Each FTZ is tailored to a certain industry and offers a variety of benefits, including lower tax rates, streamlined administrative procedures, and less investment limitations. These ideas can then be reproduced and implemented on a national basis if they are successful.
In order to attract more foreign investment and enhance commerce and regional integration, China established its first FTZ in Shanghai in 2013. Since then, the country has added 20 zones, including those in Fujian and Guangdong’s coastal provinces, as well as Shaanxi and Sichuan’s inland provinces.
FTZs have since been a trial ground for new economic policies and often reflect China’s long-term policy ambitions, just as the Shanghai FTZ was a pioneer in China’s ‘negative list’ approach to foreign investment. For example, the recent FTZs support China’s declared goal of shifting away from export production and toward a new “dual circulation” strategy focused on local demand and technological self-sufficiency.
FTZs currently account for a large share of China’s international trade and investment. Chinese FTZs contributed USD400 billion (13.5 percent) in international trade and attracted more than 3,300 new foreign firms in the first seven months of 2020, accounting for USD13.3 billion (16.8%) of foreign investment in China.
FTZs provide a variety of advantages to foreign investors whose businesses meet particular criteria, such as:
- Reduced corporate income tax (CIT) between 15% and 9%
- Payment of CIT in instalments
- Individual income tax subsidies for qualified high-end talents
- Duty-free import of machinery and equipment
- More streamlined customs clearance processes in respect of declarations and payments
Foreign-invested firms in certain areas or competences, such as logistics and pharmaceuticals that are not generally available in China, can also benefit from the FTZs’ eased restrictions.
The current list of China FTZs comprises:
- Shanghai (2013) – International trade and finance, incorporating the Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area, Pudong Airport Comprehensive Free Trade Zone Shanghai Jinqiao Economic and Technological Development Zone and Zhangjiang Hi-Tech Park.
- Guangdong (2015) – International trade and finance, incorporating the Nansha District, New Area and port in Guangzhou, the Qianhai District, Development Zone in Shenzhen and the Hengqin District, New Area in Zhuhai.
- Tianjin (2015) – High-end manufacturing, information technology (IT), R&D, logistics, international trade and financial services, incorporating Tianjin Airport Economic Area, Tianjin Dongjiang Free Trade Port Zone and Tianjin Binhai New Area Central Business District.
- Fujian (2015) – International trade and finance, incorporating the cities of Fuzhou, Xiamen and Pingtan.
- Chongqing (2016) – New tech, high tech, biotech, logistics and legal and arbitration services, incorporating Liangjiang New Area, Xiyong Area, Guoyuang Area port and Chongqing Liangjiang New Area People’s Court.
- Sichuan (2016) – IT, comms, logistics, financial services, high-end manufacturing, logistics in Chengdu city.
- Shaanxi (2016) – High-end manufacturing, logistics, financial services, e-commerce and agricultural technology in cities of Xi’an and Xianyang.
- Henan (2016) – High-end manufacturing, medical, R&D, design, e commerce, service outsourcing, tourism, cultural and creative services, incorporating cities of Zhengzhou, Kaifang and Luoyang.
- Zhejiang (2016) – Petrochemical and shipping, artificial intelligence (AI), fintech, life sciences, smart logistics and e-commerce development, incorporating cities of Ningbo, Hangzhou and Jinyi.
- Hubei (2016) – International commerce and trade, financial services, logistics, R&D, biomedicine, high-end manufacturing, e-commerce, data and cloud computing, incorporating cities of Wuhan, Yichang and Xiangyang.
- Liaoning (2016) – Port and shipping, advanced manufacturing, IT, e-commerce, finance and new technology, incorporating cities of Dalian, Shenyang and Yingkou.
- Hainan (2018) – International trade and finance on island / province of Hainan.
- Jiangsu (2019) – Trade and investment, logistics, AI, IT, financial services, advanced manufacturing, healthcare, leisure, tourism, business support, big data, port and shipping logistics, incorporating cities of Suzhou, Nanjing and Lianyungang.
- Shandong (2019) – Shipping logistics, financial services, advanced manufacturing, exchange market, AI, IT, healthcare, green-tech and biotech, incorporating Qingdao Free Trade Port Zone and cities of Jinan and Yantai.
- Hebei (2019) – IT, life science, e-commerce, biotech, logistics, high-end equipment manufacturing, aviation, logistics, port and shipping services, incorporating Xiongan Area, Zhengding Area, Caofeidian Port Area and Daxing Airport Area.
- Heilongjiang (2019) – IT, high‑end equipment, biomedicine, financial services, energy, food cultivation, logistics, tourism, healthcare and import processing for materials, incorporating cities of Harbin, Heihe and Suifenghe.
- Guangxi (2019) – Financial services, new manufacturing, logistics, digital services, culture and media, international trade, electronics and biomedicine, incorporating Qinzhou Port Area and cities of Nanning and Chongzuo.
- Yunnan (2019) – High-end manufacturing, aviation logistics, agriculture, biomedicine and health, IT, international trade, e-commerce logistics, ‘green’ food processing, tourism, medical and financial services, incorporating cities of Kunming, Dehong and Honghe.
- Beijing (2020) – Fintech, financial services and service trade innovation.
- Anhui (2020) – AI, robotics, integrated circuits, fintech, and smart cars and appliances, incorporating cities of Hefei, Wuhu and Bengbu.
- Hunan (2020) – AI manufacturing, quantum computing, renewable energies and green tech, biomedicine, agritech and e-commerce, incorporating cities of Changsha, Yueyang and Chenzhou.