Foreign firms thrive with the assistance of Free Trade Zones


Published on: June 24, 2024.

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FTZs Revolutionize Foreign Trade in China

China has become a global hub for foreign trade, thanks to the establishment of Free Trade Zones (FTZs) across the country. These zones have opened up new opportunities for foreign businesses and streamlined the import-export process. One success story is that of Zeeshan Qasim Khan, a Pakistani student who graduated from Hainan Medical University.

Khan initially planned to start an international trade venture in Guangdong province, focusing on importing Pakistani rice, carpets, and handicrafts to China, while exporting Chinese electronics, medical equipment, and marbles to global markets. However, after President Xi Jinping announced plans to transform Hainan island into a pilot FTZ, Khan decided to stay in Hainan and capitalize on the emerging opportunities.

Khan’s decision was proven right when he experienced the preferential corporate and individual income tax policies offered by the Hainan FTZ. This included a lower corporate income tax rate of 15% for enterprises in encouraged industries within the FTZ, compared to the usual 20% to 25%. Khan’s company, located in the Haikou Fullsing Internet Industrial Park, is just one example of the many foreign businesses thriving in China’s FTZs.

China launched its first FTZ in Shanghai in 2013, which marked a significant milestone in the country’s reform and opening-up. These zones introduced the concept of a negative list for foreign investment, which specifies sectors where investment is prohibited or restricted. All other areas are assumed to be open for investment. President Xi has emphasized the importance of FTZs in driving the nation’s economic agenda.

China currently has 22 FTZs, which contributed to about 18.4% of the nation’s total import and export volume in 2023. The Hainan FTZ alone has introduced over 120 innovative policies to attract foreign businesses. These zones have become pioneers of high-level openness, models of deep-seated reforms, and important platforms for serving national strategies.

The FTZs have achieved significant breakthroughs in trade, investment, finance, and government functions. They have embraced bold experimentation and innovation, resulting in the establishment of China’s first wholly foreign-owned public fund management company and its first wholly foreign-owned automobile manufacturing enterprise.

In addition to attracting foreign investment, the FTZs have also improved the business environment. For example, the Shandong FTZ has significantly increased the inflow of foreign investment and enhanced the region’s core competitive edge. The authorities in these zones have simplified procedures, improved efficiency, and provided one-stop services for businesses.

The FTZs have also introduced favorable policies to support foreigners living and working in these areas, such as simplifying work permits, visas, and residency requirements. These measures have enhanced convenience and attracted more young talent to the FTZs for economic and trade development.

Going forward, the FTZ strategy will play a pivotal role in China’s high-level opening-up agenda. These zones will focus on deeper and broader reforms in key areas such as trade, investment, finance, and cross-border data flows. By expanding the scope and depth of pioneering reforms, the FTZs will enrich the application of free trade policies and support China’s participation in high-standard international trade agreements.

In conclusion, China’s FTZs have revolutionized foreign trade by creating an environment that fosters innovation, attracts foreign investment, and streamlines business operations. These zones have become instrumental in driving economic growth and furthering China’s global integration.

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