3 Additional Free Trade Zones In China

In order to attract more foreign investors, China launched three additional Pilot Free Trade Zones (FTZs) in Tianjin, Guangdong and Fujian.

FTZs enhancing flexibility in trade have been existing in China since over two decades. Recently however, theChinese government extended this policy and established several new so called Pilot Free Trade Zones, based on the model of Shanghai. For a better understanding of the concept of China’s Pilot FTZs, you can think of them as special economic regions provided with special benefits for national but also foreign companies to settle down in order to enjoy certain advantages. Not only tax incentives, lower tariffs and flexibility in foreign currency exchange restrictions attract more foreign investment to these areas, but also simplified registration procedures and more foreigner friendly terms regarding all kind of requirements.

Free Trade Zones in China were implemented for all kind of industries covering mainly production and trading purposes. The new FTZ Tianjin for example has special districts for microelectronics, light textiles, chemicals, the car industry and more, all strategically well situated in terms of infrastructure, between Beijing and the Tianjin port and airport, two leading freight hubs in the world.

Furthermore the government announced that the list of possible industries for foreign investment will be extended. Although no specific plans were revealed yet, restrictions for foreign investment in special industries, are said to be eased in future. As China is currently the largest recipient of foreign direct investment (FDI) the possibility of liberalizations, for example in the financial sector amongst many other restrictions on the ‘negative list’, attracts the attention of many foreign investors, bearing enormous potential of new business opportunities in the future. This is another way to further attract foreign companies investing in China, despite the slowdown of economical growth.

FOCUS: PILOT FREE TRADE ZONE TIANJIN

Not only because of the fact Tianjin is close to the government of China, which can be an important parameter in a company’s expansion strategy, but also because of several other factors, Tianjin is a worth to consider place for setting up your business in China. Also seen as the extension of the old Silk Road, the potential in logistics with one of the biggest ports and airports in terms of freight traffic worldwide and a fabulous infrastructure connection to the rest of the country trough China’s newly implemented railway network for high-speed trains is enormous. Furthermore, the Pilot FTZ Tianjin is the only one of its kind in the North of China with major oil and gas depots in shortest distance.

Currently, the main industries to be found in Tianjin so far include the automotive, electronics, biotechnology, pharmaceutical and the petrochemical industry. The by the government initiated TEDA (Tianjin Economic-Technological Development Area) and Binhai New Area, are very supportive in terms of easing administrational procedures. Setting up your company in the Pilot FTZ Tianjin, in the first step you can enjoy the following benefits:

• Set up a WFOE within two weeks
• It takes 24 hours to register your company (business license, company chop)
• Easier leasing procedure for the acquisition of big assets
• The transfer of starting capital does not require the SAFE (State Administration of Foreign Exchange) approval, it will be only necessary to register with the respective capital bank.
• A new electronic customs system will be introduced, enhancing the speed of the customs’ declaration
• Companies will be able to directly convert RMB from and to a foreign currency and therefore save transaction costs
• Companies are allowed to use their own authorized transportation vehicles

As the FTZs are pilot projects and still undergoing a process of development it will stay an exciting time. Nevertheless, a few thousand foreign companies from small and medium sized to large enterprises such as Volkswagen or Toyota settled down in the Pilot FTZ Tianjin already. Considering China intends to attract more foreign direct investment, this number is expected to further increase.

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