Foreign firms flourish with the assistance of Free Trade Zones
Published on: June 24, 2024.
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In 2018, Zeeshan Qasim Khan, a Pakistani student who had just graduated from Hainan Medical University, had big plans for starting a trade venture in China’s Guangdong province. Initially focused on importing Pakistani rice, carpets, and handicrafts to China, Khan’s plans shifted after President Xi Jinping’s announcement to transform Hainan into a pilot free trade zone.
The decision to remain in Hainan proved fruitful for Khan. He highlighted the advantages of the Hainan Free Trade Port (FTP), particularly the favorable tax policies. The 15 percent corporate income tax rate for enterprises in encouraged industries within the FTP is significantly lower than the usual rate of 20-25 percent.
Khan’s company, based in the Haikou Fullsing Internet Industrial Park, is just one of many foreign businesses benefiting from China’s increasing openness and robust supply and industrial chains in its network of free trade zones.
China launched its first free trade zone (FTZ) in Shanghai in 2013, marking a significant milestone in the country’s reform and opening-up. These FTZs serve as experimental platforms for bold reforms and innovation. President Xi emphasized their importance in driving China’s economic agenda.
To date, China has established 22 FTZs, contributing to around 18.4 percent of the nation’s total import and export volume in 2023. The Hainan FTP alone has introduced over 120 innovative policies.
Analysts recognize the vision of President Xi and acknowledge that the FTZs have been pioneers of high-level openness, facilitating deep-seated reforms and serving national strategies. These zones have implemented pioneering initiatives, such as negative lists for market entry and cross-border trade in services. They were also home to China’s first wholly foreign-owned public fund management company and its first wholly foreign-owned automobile manufacturing enterprise.
In addition, the FTZs have achieved breakthroughs in trade, investment, finance, and government functions through bold experimentation and innovation. For example, the establishment of an FTZ in Shandong province has significantly spurred foreign investment inflow and improved the business environment.
The favorable policies in the FTZs, such as simplified procedures and one-stop services, have attracted foreigners like Khan, who appreciate the convenience and efficiency these measures bring.
Looking ahead, China’s FTZs will play an even greater role in coordinating deep reforms and high-level openness. They will focus on exploring deeper and broader reforms in key areas such as trade, investment, finance, and cross-border data flows. Furthermore, by advancing institutional openness and aligning with international trade agreements, the FTZs will serve as comprehensive experimental platforms for reform and opening-up, supporting China’s global trade ambitions.
By seizing the opportunities provided by the FTZs and leveraging their preferential policies and vast opportunities, businesses and individuals, including Khan, are capitalizing on China’s growing openness and shaping the future of international trade.
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