Master your knowledge of Chinese Free Trade Zones with this article and choose the right entry location for your business
Co-authored by: Harini Nanayakkara & Zara Kukkamaa
What Is the Definition of China's Free Trade Zone?
Free trade zones (also known as FTZs) in China are a type of special economic zone. More specifically, they are selected geographical areas across China, in which commodities may be imported, stored, handled, manufactured, or reconfigured and re-exported under strict customs regulations and are normally duty-free. In general, the majority of Chinese free trade zones are located near large harbors and airports, where lots of commercial activities take place.
What Are the Benefits of Free Trade Zones?
With the advent of free trade zones, global organizations landed there and have found it much easier to access the Chinese market. For instance, when storing, handling, producing, and re-exporting goods, you may enjoy little interference from Chinese customs or the excess amount of import taxes. Some generalized benefits are:
Corporate tax rates are lower.
Exemption from import taxes until items are transported out of the warehouse.
Free currency conversion rate (no fees for converting major currencies)
Customs clearance that is quick.
Choose from a variety of transportation, pick-and-pack, and logistic service providers which are all close by.
VAT refunds that are processed faster.
The nature of free trade zones is to assist importers who are at an early stage of doing business in China or want to access the Chinese market and free trade zone policies are subject to each individual zone. As a result, potential investors shall examine a number of additional factors when deciding where to invest. While most of the free trade zones are effectively connected by transportation, not all are not located near any significant commercial or residential districts.
On the other hand, although all free trade zones benefit investors with a wholesale network to other parts of China or exports to other countries, some businesses requiring public engagements would need to pick their location carefully.
The Chinese government is usually behind the establishment and management of the free trade zones, overlooking product inflows, registering imports with customs and the China Inspection and Quarantine Services, and improving the overall quality of imported goods. The purpose of this kind of implementation is to protect Chinese consumers and discourage illegitimate imports.
A Closer Look at the 21 Free Trade Zones in China
The Hohot team has compiled a summary of the 21 Free Trade Zones located in China with high-level information on locations and focused industries:
This is mainland China's first free-trade zone consisting of 3 existing sub-free trade areas in the Pudong District:
Waigaoqiao Free Trade Logistics Park: China's first bonded area, as well as its first state-level import-export trade promotion and innovation demonstration area, was the Waigaoqiao Free Trade Zone. Free commerce, export processing, logistics warehousing, and trading and displaying bonded commodities are a few of its economic activities.
Yangshan Free Trade Port Area: Yangshan Free Trade Port serves as the primary carrier for expanding international shipping services in Shanghai's extensive pilot area.
Pudong Airport Comprehensive Free Trade Zone: The bonded logistics area and the west freight sector of the airport are combined in the Pudong Airport Free Trade Zone. It benefits from being the combined aviation hub for the Asia-Pacific region and serving as a testing ground for Shanghai's growing airport-based services sector.
International trade and finance are the two focused industries of the Shanghai Free Trade Zone.
This trade zone has two focused industries - international trade and finance. Similarly, it consists of 3 existing sub-free trade areas: Guangzhou (Nansha District, New Area, and port), Shenzhen (Qianhai District, Development Zone), and Zhuhai (Hengqin District, New Area).
The development goals of the Guangdong Free Trade Zone are to:
Create an international, market-oriented, and regulated business environment based on three to five years of pilot reforms;
Establish a new and open economic system;
Deepen Guangdong - Hong Kong - Macao cooperation;
Create new advantages in international economic cooperation;
Establish a free trade park with a regulated environment meeting high international standards and to offer investment and trade facilitation.
One main target of the Tianjin Free Trade Zone is to implement coordinated development of Beijing, Tianjin, and Hebei Province. This trade zone consists of 3 sub-areas, which are listed below with their focused sectors:
Tianjin Airport Economic Area: High-end manufacturing industries, aviation, aerospace, equipment manufacturing, IT, R&D, design and aviation logistics are the areas of interest at the Free Trade Zone in the airport economic area in Tianjin.
Tianjin Dongjiang Free Trade Port Zone: Shipping logistics, international trade, and financial leasing are the areas of interest at the Free Trade Zone in Dongjiang Tianjin.
Tianjin Binhai New Area Central Business District: Financial services and commerce are the areas of interest at the Free Trade Zone in Binhai New Area Central Business District in Tianjin.
Focused on international trade and finance industries, the Fujian Free Trade Zone aims at promoting the free flow of goods, services, capital, and personnel, and strengthening Fujian Province’s economic ties with Taiwan. There are three sub-free zones:
Fuzhou - Fuzhou Free Trade Zone takes the lead in promoting trade and investment with Taiwan and concentrates on the development of an advanced manufacturing base.
Xiamen - The Xiamen Area of the Fujian Free Trade Zone includes the Haicang port area in southeast China and the cross-Strait trade center core zone. As a free trade zone, it is a pioneer in China that combines the development of land and sea ports, airports, and cruise homeports.
Pingtan - The Pingtan Area of the Fujian Free Trade Zone concentrates on fostering relations with Taiwan and drawing visitors from abroad to the island. It puts more flexible policies into place to ease trade, capital, personnel, and investment exchanges.
Aiming at supporting Chongqing to be the strategic center in the western China, the Chongqing Free Trade Zone was established in 2017. It consists of 3 parts and their focused sectors are:
Liangjiang New Area: New technologies and biotechnologies.
Xiyong: Microelectronic activities, high-tech technologies, and biotechnologies.
Guoyang Port: Logistics, trade, new technologies, and biotechnologies.
Chengdu: IT & communications, logistics, vehicle import, financial services, high-end manufacturing, high-tech industries, air-transportation-related economy, and port services are the areas of interest at the Free Trade Zone in Chengdu.
Xi’an: High-end manufacturing, aviation logistics, trade, financial services, tourism, exhibition services, and e-commerce are the areas of interest at the Free Trade Zone in Xi’an.
Xianyang: Agricultural science and technology are the areas of interest at the Free Trade Zone in Xianyang.
Zhengzhou: Development of advanced manufacturing industries, such as high-end equipment, automobile production, and biomedicine. It will also promote a range of high-end services such as logistics, e-commerce, financial services, service outsourcing, design, and trade conferences or exhibitions are the areas of interest at the Free Trade Zone in Zhengzhou.
Kaifeng: Service outsourcing, medical tourism, tourism, cultural trade, design, fine art trading and logistics equipment manufacturing, agricultural processing and related trade activities are the areas of interest at the Free Trade Zone in Kaifeng.
Luoyang: High-end manufacturing such as equipment manufacturing, robotics and innovative materials, R&D, design, e-commerce, service outsourcing, tourism, cultural and creative industries, cultural trade and cultural exhibitions are the areas of interest at the Free Trade Zone in Luoyang.
Ningbo: International petrochemical and shipping hub for wet bulk trade. Oil and gas are the areas of interest at the Free Trade Zone in Zhejiang.
Hangzhou: AI, fintech, life sciences, e-commerce, and high-tech manufacturing are the areas of interest at the Free Trade Zone in Hangzhou.
Jinyi: commodity, logistics, and manufacturing are the areas of interest at the Free Trade Zone in Jinyi.
Wuhan: International commerce and trade, financial services, logistics, R&D, design, and emerging industries such as, but not limited to, optoelectronics information, advanced manufacturing, and biomedicine are the areas of interest at the Free Trade Zone in Hubei.
Yichang: Cultural tourism, biomedicine, R&D, shipping logistics, equipment manufacturing, and the high-tech industry are the areas of interest at the Free Trade Zone in Yichang.
Xiangyang: Manufacturing of high-end equipment, new-energy vehicles, logistics, trade, product exhibition, e-commerce, big data, cloud computing and other services are the areas of interest at the Free Trade Zone in Xiangyang.
Dalian: Port and shipping logistics, financial trade, advanced equipment manufacturing, high-tech and new technology, circular economy, shipping services, and other industries are the areas of interest at the Free Trade Zone in Dalian.
Shenyang: Advanced manufacturing, auto vehicles and auto components, aviation equipment, modern services including finance, science and technology, and logistics are the areas of interest at the Free Trade Zone in Shenyang.
Yingkou: Services, trade logistics, cross-border e-commerce, finance, strategic emerging industries, information technology, and high-end equipment manufacturing are the areas of interest at the Free Trade Zone in Yingkou.
According to the Hainan FTZ development plan, the Hainan Free Trade zone will be one of the region's most open and internationalized zones. More precisely, it will be friendly to trade and investment, have a strong legal framework, maintain a powerful financial services industry, display safe and efficient oversight, and have fostered a better ecological environment that will have a significant impact on neighboring areas. In Hainan, there is one Free Trade Zone.
Hainan Island/province. Capital: Haikou. International trade and finance are two industries that are focuses of interest at the Hainan Free Trade Zone.
Suzhou: Trade and investment, administrative services, legal systems, aerospace, and biomedical science are the areas of interest at the Free Trade Zone in Suzhou.
Nanjing: Semiconductors, life and health industries, AI, IT, and finance are the areas of interest at the Free Trade Zone in Nanjing.
Lianyungang: Advanced manufacturing such as biomedicine, new materials, new energy and high-end equipment, logistics, cross-border e-commerce, technology services, financial services, health care, leisure, tourism, business support, big data, port and shipping logistics, distribution and transshipment, warehousing, port processing, trading, and supporting services are the areas of interest at the Free Trade Zone in Lianyungang.
Qingdao Free Trade Port Zone: Marine industries, foreign trade, shipping logistics, financial services, advanced manufacturing, exchange market, and bonded processing are the areas of interest at the Free Trade Zone in Qingdao.
Jinan: AI, industrial and financial services, health care and elderly care, tourism and IT are the areas of interest at the Free Trade Zone in Jinan.
Yantai: High-end manufacturing, new materials, IT, green tech and biomedicine are the areas of interest at the Free Trade Zone in Yantai.
Xiongan Area: IT, life science, e-commerce, biotechnology, and high-tech-related services are the areas of interest at the Free Trade Zone in Xiongan.
Zhengding Area: Airport economy, biomedicine, logistics, high-end equipment manufacturing, and aviation are the areas of interest at the Free Trade Zone in Zhengding.
Caofeidian Port Area: International commodity trade, port and shipping services, energy storage and distribution, and high-end equipment manufacturing are the areas of interest at the Free Trade Zone in Caofeidian port.
Daxing Airport Area: Aviation logistics, aviation technology, and financial leasing are the areas of interest at the Free Trade Zone in Daxing airport.
Harbin: Next-gen IT, novel materials, high-end equipment, biomedicine, tech-based services, financial services, and tourism are the areas of interest at the Free Trade Zone in Harbin.
Heihe: Cross-border energy resources, food cultivation, trade, logistics, tourism, healthcare, and financial services are the areas of interest at the Free Trade Zone in Heihe.
Suifenghe: Import processing for materials such as timber, grains and clean energy, financial services, and logistics are the areas of interest at the Free Trade Zone in Suifenghe.
Nanning: Financial services, logistics, digital services, culture and media, and new manufacturing industries are the areas of interest at the Free Trade Zone in Nanning.
Qinzhou Port: Port logistics, international trade, ‘green’ chemicals, new-energy vehicle parts, electronics, and biomedicine are the areas of interest at the Free Trade Zone in Qinzhou port.
Chongzuo: International trade, logistics, financial services, and tourism are the areas of interest at the Free Trade Zone in Chongzuo.
Kunming FTZ: High-end manufacturing, aviation logistics, agriculture, biomedicine and health, IT, F&B and consumer goods manufacturing, tourism, logistics, new materials, and advanced equipment manufacturing are the areas of interest at the Free Trade Zone in Kunming.
Dehong: Imports & exports, cross-border e-commerce logistics, ‘green’ food processing, tourism, medical and financial services are the areas of interest at the Free Trade Zone in Dehong.
Honghe: Imports & exports, cross-border e-commerce logistics, tourism, medical and financial services are the areas of interest at the Free Trade Zone in Honghe.
The Beijing FTZ's goal is to create creative institutions that can be promoted to meet the central government's objectives for Beijing, Tianjin, and Hebei's innovation-driven and coordinated growth. It will assist in the establishment of a worldwide technological innovation center, as well as a pilot zone for greater service sector liberalization and an experimental zone for the digital economy. It also intends to establish a high-end "opening up" platform for Beijing, Tianjin, and Hebei provinces.
Beijing: Innovation, fin-tech, and services are the areas of interest at the Free Trade Zone in Beijing.
Hefei: Integrated circuits, AI, fin-tech, and cross-border e-commerce are the areas of interest at the Free Trade Zone in Hefei.
Wuhu: Smart home appliances, aviation, robotics, and shipping are the areas of interest at the Free Trade Zone in Wuhu.
Bengbu: Silicon-based materials, green tech, and green energy are the areas of interest at the Free Trade Zone in Bengbu.
Located at the intersection of the Yangtze River economic belt and the coastal economic belt, Hunan Pilot Free Trade Zone aims to transform central China into a manufacturing power. This zone is also known for its deep trade cooperation with Africa - a new driving force for the opening up of China's inland regions. This trade zone is combined with 3 areas:
Changsha: The Changsha section of the FTZ has recently given the region's development new momentum in addition to acting as a pilot zone for putting China's national opening-up plan into practice. As a part of the FTZ, the Changsha region embraces greater opening-up through initiatives to create industrial clusters, advance institutional innovation, and enhance the business climate.
Yueyang: The aim of Yueyang FTZ is to build an integrated shipping and logistics center for the middle reaches of the Yangtze River and a demonstration zone for the inland port economy. It will concentrate on growing industries in shipping and logistics, e-commerce, and new generation information technology.
Chenzhou: The aim of Chenzhou FTZ is to create a demonstration zone for cooperation between Hunan, Guangdong, Hong Kong, and Macao as well as a platform for the industrial transfer and the transformation and upgrading of trade procedures for the mainland.
Manufacturing of AI, Quantum computing, renewable energies, and green tech are some common areas of interest at the Free Trade Zones in Changsha, Yueyang, and Chenzhou.
Final Thoughts:
Each zone has a distinct focus which allows them to offer distinct benefits to businesses when entering these zones. Sometimes the benefits formerly discovered in one zone may shift due to shifting priorities. The expansion of the One Belt One Road (OBOR) plan and the Free Trade Zones (FTZs) will be critical to China's long-term development and international investors.
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