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China (Shanghai) Pilot Free Trade Zone

Picture: China (Shanghai) Pilot Free Trade Zone
Picture: China (Shanghai) Pilot Free Trade Zone

The China (Shanghai) Pilot Free Trade Zone (SHFTZ or Shanghai FTZ) was approved by the State Council on 17 August 2013. It was the first pilot free trade zone in China, covering the four special customs supervision areas of Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Free Trade Zone. On 28 December 2014, the National People's Congress authorised the State Council to expand the SHFTZ by incorporating the Lujiazui Finance and Trade Zone, Jinqiao Economic and Technological Development Zone and Zhangjiang High-Tech Park. The expanded FTZ has a total area of 120.72 sq km.

Under the Overall Plan for the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone, promulgated on 6 August 2019, a new area of the SHFTZ (the Lingang New Area) is to be set up to the south of the Dazhi river, east of Jinhui Port and south of Xiaoyangshan Island and Pudong International Airport in Shanghai. Initially, the Lingang New Area will extend across 119.5 sq km, including 76.5 sq km in the southern part of the Lingang district, 18.3 sq km of Xiaoyangshan Island and 24.7 sq km to the south of Pudong International Airport.

Development Goals

Under the Plan for Further Deepening the Reform and Opening up of the China (Shanghai) Pilot Free Trade Zone (see Chinese version), approved by the State Council, the SHFTZ is expected to improve its investment management systems using a negative-list approach, the trade regulation system focusing on trade facilitation, the financial innovation system aimed at capital account convertibility and the liberalisation of financial services, and a system of ongoing and ex post supervision with the transformation of government functions at its core. The goals are to build an institutional innovation system in line with common international rules of investment and trade, use key functional areas of finance and trade, advanced manufacturing and technological innovation to influence other sectors to the fullest extent, and create an FTZ with the highest degree of openness, investment and trade facilitation, currency conversion freedom, convenient and efficient regulation, and a sound legal environment.

According to the Overall Plan for the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone (See Chinese version), the Lingang New Area will use the most competitive free trade zones worldwide as a benchmark. It will implement opening-up policies and systems that can bring about global market competitiveness and intensify the risk stress test for the open economy system. It will aim to facilitate investment and business operations with players from outside the Area, and establish free movement of goods, convenient capital flow, highly open transportation, free and convenient personnel management and swift information connectivity.

The creation of such a zone, tasked with special economic functions and commanding greater global influence and competitiveness, is expected not only to develop the country’s overall opening-up strategy, but also to help integrate it into other major national strategies. By 2025, the Lingang New Area should have in place a well-established framework of liberalisation and facilitation systems for investment and trade. By 2035, it is envisaged that the New Area will command substantial global influence and competitiveness, and play a crucial role in the allocation of global high-end resources. In this way it is hoped that the Lingang New Area will serve as an important vehicle for China’s deeper engagement in economic globalisation.

Foreign Investment Management

The Special Administrative Measures (Negative List) on Foreign Investment Access (See Chinese version), issued by the National Development and Reform Commission, set out unified special management measures governing issues such as equity ratios and senior management personnel of businesses operating in FTZs in China. For industry sectors falling outside the scope of the negative list, the principle of foreign and domestic investors receiving the same treatment will apply.

Special administrative measures relating to national security, public order, public culture, financial prudence, government procurement, subsidies, special procedures and tax-related matters not on the negative list remain subject to existing provisions. Foreign investment concerning national security is subject to review in accordance with the Tentative Measures for the National Security Review of Foreign Investment in Free Trade Zones (See Chinese version).

Positioning of Sub-zones

FTZ Bonded Area

The FTZ Bonded Area, with an area of 28.78 sq km, was the first designated pilot area of the SHFTZ before its expansion. The FTZ Bonded Area comprises Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Free Trade Zone.

Waigaoqiao Free Trade Zone (10 sq km) was China's first bonded area and its first state-level import-export trade promotion and innovation demonstration area. Its economic functions include free trade, export processing, logistics warehousing and bonded goods display and trading.

Waigaoqiao Free Trade Logistics Park (1.03 sq km) is China's first integrated FTZ-port pilot logistics park as well as an important base for modern international logistics development.

Yangshan Free Trade Port Area (14.16 sq km) is under "integrated FTZ-port" supervision. It is Shanghai's comprehensive pilot area’s core carrier for international shipping service development.

Pudong Airport Free Trade Zone (3.59 sq km) integrates the airport's bonded logistics area and the west freight area. It has the advantage of being the composite aviation hub for the Asia-Pacific region and is the pilot zone for the development of Shanghai's airport-based service industry.

Lujiazui Finance and Trade Zone

Lujiazui Finance and Trade Zone, with an area of 34.26 sq km, covers the Lujiazui financial district, the World Expo site and Qiantan. It forms the core of Shanghai's international financial centre, the high-end services cluster of Shanghai's international shipping centre and the modern commercial hub of Shanghai's international trading centre. Finance, insurance, securities and commerce are its dominant sectors. Headquarters of multinational companies, shipping agencies, emerging financial institutions, and futures markets are forming clusters here.

Jinqiao Economic and Technological Development Zone

With a planned area of 20.48 sq km, Jinqiao Economic and Technological Development Zone is Shanghai's core functional area for advanced manufacturing, a hub for producer services, a pilot area for strategic emerging industries, and a demonstration area for ecological industries. Electronic information, automobile manufacturing and parts, modern home appliances and biomedicine are the dominant industries in this zone.

Zhangjiang High-Tech Park

With a planned area of 37.2 sq km, Zhangjiang High-Tech Park is Shanghai's core base for the innovation-oriented national strategy. Integrated circuit, software and biomedicine are the three dominant industries in this park, which boasts nine state-level bases, including the National Shanghai Biomedical Science and Technology Industry Base and the National Information Industry Base, alongside incubators of various models and types.

Lingang New Area

Initially, the Lingang New Area will extend across 119.5 sq km, including 76.5 sq km in the southern part of the Lingang district, 18.3 sq km of Xiaoyangshan Island and 24.7 sq km to the south of Pudong International Airport.

The Lingang New Area will have four innovations designed into its systems. First, by focusing on becoming a zone tasked with special economic functions and commanding greater global influence and competitiveness, the Lingang New Area is setting higher development standards in pilot reforms.

Second, by actively serving the national strategies of Belt and Road and the Yangtze River Economic Belt development, the Lingang New Area will emphasise integration into the Yangtze River Delta development strategy.

Third, through focusing on key industries like integrated circuits, artificial intelligence, biomedicines and civil aviation, the Lingang New Area will support measures dealing with core areas such as investment environment, trade oversight, international talent flow and taxation. This is designed to help establish an open industrial system that is competitive in the international market.

Fourth, through the establishment of the Yangshan Special Comprehensive Bonded Zone, the Lingang New Area will explore the implementation of regulatory policies that are based on safety supervision while offering a higher level of trade liberalisation and facilitation.

Latest Policies and Regulations

Please see China (Shanghai) Pilot Free Trade Zone official website.

Please click here to view the latest articles of China Pilot Free Trade Zones.

Content provided by Picture: HKTDC Research
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