On July 15, 2016, the Shenzhen Foreign-Trade Zone (FTZ) and Benchmark Chambers International (BCI) graciously hosted representatives of Gardere’s international trade group at their facility in Shenzhen, People’s Republic of China (PRC).
A pilot program, the Shenzhen FTZ was established four years ago to provide tax benefits to registered companies. This FTZ offers a wide range of benefits in a state-of-the-art business complex at a major customs port. Similar to other FTZs around the world, the Shenzhen FTZ offers tax advantages, duty savings and deferred customs entry, as well as other financial and logistical benefits.
In addition, the Shenzhen well FTZ offers BCI services. BCI is a nonprofit organization and government think tank responsible for researching Hong Kong, Macau and Taiwan, as well as foreign laws and cross-border investment. Global companies regularly seek BCI’s expert guidance in areas such as customs compliance, customs valuation and registration for overseas investment enterprises. For example, in 2015, BCI assisted a pharmaceutical company in navigating the U.S. FDA regulations on exports of calcium sulfite. Additionally, BCI offers trade compliance training and a forum for Chinese businesses to meet and network.
BCI pointed out there is a particularly high demand for imports of electronics into the Chinese market. In 2015, BCI said that the number of enterprises importing electronic equipment and components into the PRC totaled 60,800. This number includes 19,900 manufacturers and 40,900 software and IT service providers.
While at the FTZ, Gardere’s international trade team also met with a representative from the Chinese Institute of Electronics. He noted there are three main sectors growing rapidly in the PRC: computers, telecommunications and consumer telecommunications. He explained many electronics companies would like to see increased trade with the U.S.
Of course, PRC companies have expressed serious concerns that strict U.S. export controls on electronics have prevented them from buying U.S. components. As a result, some PRC companies are pursuing the alternative route of setting up research centers within the U.S. rather than in the PRC. We will continue to monitor the trends in this area.
As evidenced by its impressive FTZ, Shenzhen boasts a strong cross-border economy –especially in the electronics industry. Some even refer to Shenzhen as the Silicon Valley of the PRC. As our clients continue to do business in the PRC, we expect to see continued cross-border transaction growth out of this dynamic and growing port city.