China free trade zone benefits may be a lure for foreign investors who try to tap into the Chinese market. Free trade zones (FTZs) in China are a specific class of special economic zones; an area where goods may be landed, handled, manufactured and re-exported without intervention of the customs authority. In recent years, FTZs have been important laboratories for legal innovation in China.
Brief Introduction to China’s FTZs
Inaugurated in 2013, the Shanghai FTZ was the first in mainland China. It acted as a testing ground for legal innovation, attracting foreign investment with fewer restrictions. In 2015, the government announced three more FTZs in Fujian, Guangdong, and Tianjin. This time, the government assigned strategic positions for each of the FTZs: Fujian supports trade with Taiwan; Guangdong supports economic integration with Hong Kong and Macao; and, Tianjin supports the northeastern region and helps develop offshore financial markets.
In 2016, the government announced plans for seven more FTZs, underlining the government’s long-term plans to develop inland China and support the One Belt, One Road (OBOR) initiative. The FTZs are in Chongqing, Liaoning, Henan, Hubei, Shaanxi, Sichuan, and Zhejiang.
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.
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.
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.
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).
Benefits of FTZs
The following is a shortlist of concrete benefits why foreign entities should register in a FTZ for your reference:
1. Choosing a virtual office instead of a real one;
2. Procedures registering in a FTZ are much quicker and easier;
3. Less or no (import/export) taxes;
4. Easier conversion from RMB to foreign currencies;
5. Special customs monitoring system:
6. Detailed customs clearance is only needed in a later stage;
7. Faster custom clearances of goods;
8. No import tax when imported into the FTZ;
9. Bonded warehouses;
10. Broadening of investment horizons.
The Chinese government has been working hard to attract more startups and innovations to the country. In Qianhai, Shenzhen, there may be ways to impress the government enough that they can sponsor your company. That could mean a small grant or a full payment of opening and operating the new Chinese company. This is on a case by case basis and should just be a “bonus” as you look to establish your business in the free trade zone.
Business setup within an FTZ does not guarantee success. For some businesses, the policy and trade environment within the area may present competitive advantages, while it may be less beneficial for others. Before making the decision, firms should do their homework and consult with experts to understand which path is the best path for the company’s expansion.
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website www.tannet-group.net, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to email@example.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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