The Minister of Commerce for China has announced the set-up of seven new Free Trade Zones (“FTZs”) in Liaoning, Zhejiang, Henan, Hubei, Sichuan, Shanxi province and Chongqing city.
China set-up its first FTZ in Shanghai in 2013, which was followed a year later by the Tianjin, Fujian and Guangdong FTZs.
Based on their unique geographical and industrial advantages, each one of the new FTZs will have different focus areas, supported by corresponding preferential policies. For example, Henan FTZ, located in central China, will focus on developing a modern transportation system to become a logistics hub. Chongqing, Sichuan and Shanxi FTZs, located in less-developed parts of western China, are expected to develop high-tech industries, attract foreign investment and boost trade with countries part of the “One Belt One Road” initiative. Hubei FTZ will focus on high-tech sectors whereas the coastal Zhejiang FTZ is expected to explore trade liberalisation for commodities. Although the general plans have been approved by the central government, each province will need to devise their own implementation plans, thus a time frame for launching the new FTZs has not been announced. However, it is reasonable to expect that the similar preferential policies and negative list mechanism adopted in Shanghai FTZ will apply to the new FTZs.
With the addition of these new FTZs, China will have 11 free trade zones covering most regions of the country. Considering that the new FTZs (except Zhejiang) are located in less developed regions, it is expected that the operating costs, especially costs for business premises and personnel, will be significantly lower than the FTZs located in first and second tier cities like Shanghai and Tianjin. Foreign investors will have more options in setting up subsidiaries in these FTZs where they can enjoy preferential policies at a lower cost, and for those investors active in the mentioned specialist business areas they may be minded to choose one of the new FTZs for their latest Chinese project.