China’s first pilot free trade zone (FTZ) was officially launched in Shanghai in 2013. Now, 10 years later, there are 22 FTZs across the country, and they have progressively formed a high-level innovation pattern of reform and opening-up.
At the sixth China International Import Expo (CIIE), the Chinese Academy of International Trade and Economic Cooperation (CAITEC) at the Ministry of Commerce released a development report on the 10th anniversary of China’s FTZs. According to the report, FTZs have become a leading force of high-level opening-up, a pioneer of in-depth reform, a demonstration of high-quality development as well as a major platform serving the national strategy.
Since its establishment, the Lin-Gang Special Area of the Shanghai FTZ has conducted innovation and exploration, placing it at the forefront of China’s opening-up. The Lin-Gang Exhibition Area was unveiled at this year’s CIIE for the first time and brought together nearly 100 transnational enterprises to present their high-quality development achievements, including new technologies, new business forms, and new growth models.
Ultra-large freighters are operating in a busy but orderly fashion hoisting containers at the Yangshan Port in Shanghai on December 30, 2022.
Institutional Innovation
Origin Digital Intelligence Technology Development Co., Ltd. is located in Yangshan Special Comprehensive Bonded Zone (CBZ) of the Lin-Gang Special Area. In its 15,000-square-meter high-standard warehouse, food, clothing, cosmetics, and even gearboxes, motorboats, large diesel engines, and other goods are placed in different areas. Some of these goods were imported from abroad, while others were transported to the CBZ by domestic processing export products enterprises, according to Huang Yingming, chairman of the board of Origin.
Different from cross-border e-commerce products, traditional bulk commodities need to go through a complete set of compliance systems such as customs declaration, paying duty fees, inspection and quarantine before they can be put on the market. The implementation of the “classified supervision according to the status of goods” system puts goods of different factories, different brands, bonded, and non-bonded goods in the same warehouse for unified management and distribution. “When non-bonded goods go through the formalities, you can first use a few goods to quickly sell in the form of cross-border e-commerce to test the market. If the response is good, the remaining goods that have completed the procedures will be sent offline through general trade channels,” said Huang. The low cost and user-friendly services provided by Yangshan have led many companies to choose it to bring their goods into China and expand their business here.
As a result of the change from traditional paper customs declaration to the simple self-declaration of enterprises, the customs clearance time for goods entering the bonded area has been shortened from days to seconds. From the enterprise interface of an integrated information management service platform, the stages and timing of the declaration of goods are clearly displayed. It is not only used as an electronic account book for enterprises, but also integrates business information of customs, quarantine, and duty fees, which greatly improves the convenience of customs clearance.
The fine trade environment of intelligent customs clearance and the innovative trade supervision system bring a lot of business opportunities to Origin. With the support of the CBZ policy, Origin combines customer needs together to provide intelligent and integrated solutions for overseas customers. According to Huang, in addition to the storage of goods, Origin also provides services such as food labeling, cosmetics gift packaging, and clothing quality inspection, to save as much time and money as possible for customers.
As one of the first enterprises to settle in the Yangshan CBZ, Origin’s business scale has continued to expand by virtue of the FTZ development. According to Huang, despite the negative impacts of the recent global economic recession during the past few years, the number of its customers has continued to grow, with its warehouse area expanding from 800 square meters to about 50,000 square meters, and its business having expanded in categories, and extended to reach dozens of countries.
Yangshan is the only special CBZ in China. As an important carrier of the internationally recognized and most competitive FTZ, it implements a higher level of trade liberalization and facilitation policies and systems. According to statistics from Shanghai Customs, since the construction of the Lin-Gang Special Area, the import and export value of the Yangshan CBZ has increased from RMB 86.6 billion in 2019 to RMB 209 billion in 2022. In the first eight months of 2023, its import and export value reached RMB 151.8 billion, a year-on-year increase of 52 percent, ranking it the first among the top 10 CBZs in China.
Visitors are taking pictures on November 6, 2023 at a display area at the China Pavilion of the sixth CIIE in Shanghai exhibiting the achievements of the Pilot Free Trade Zone over the past decade.
Technologically Empowered
A total of 3,486 companies from 128 countries and regions gathered at the recently concluded sixth CIIE to present their new products and technology. Many of their goods and materials entered the CIIE venue through the Lin-Gang Special Area.
According to Yang Yanbin, deputy general manager of the Production and Operation Department of Shanghai International Port (Group) Co., Ltd. (SIPG), Phase IV of Yangshan Deep Water Port is one of the smartest container terminals in the world. There is only one link in the whole process of terminal operation that requires manual intervention. Thanks to the intelligent and integrated control system named ITOS independently developed by SIPG, a container crane operator no longer needs to sit in a cabin dozens of meter above the ground, but instead sits in the office to command the operation of a gantry crane to handle and transport shipping containers 100 kilometers away. Thus the work environment has been greatly improved.
So far, ITOS has been adopted by 14 domestic and foreign automated port terminals in countries along the Belt and Road.
Yang recalled that the development team of 200 people at that time made the port their temporary home to be able to conduct more work. It took them three years to successfully develop the Chinese system. “The cost difference between researching a new system and purchasing one is huge,” he explained. “The reason why we chose the costly, time-consuming, and labor-intensive independent research and development stems from SIPG’s desire to break through the bottleneck, master the core technology, and avoid the passive situation of containment, which is also great necessity to ensure data security.”
Shanghai’s container throughput has ranked first globally for 13 consecutive years. In 2022, Shanghai Port’s container throughput reached 47.3 million 20-foot equivalent units (TEUs), creating a new record.
In addition, in line with the trend of green development, SIPG launched new business in 2023. To be specific, through the design of new logistics channels at the port, customers are attracted to transport containers to the port by feeder vessels by waterway that were originally transported by land, and the proportion of water transit during the first three quarters exceeded 55 percent. Besides, Shanghai Port has become China’s first port with liquefied natural gas (LNG) bunkering service capability. So far, 53 ships have completed 294,000 cubic meters of new energy bunkering.
On September 20, 2023, SIPG, State Power Investment Corporation Limited, China COSCO SHIPPING Corporation Limited and China Certification & Inspection Group jointly signed the Memorandum of Cooperation on the Construction of a Green Methanol Industrial Chain to fully promote the implementation of the first batch of green methanol production projects in China.
“The 10-year development of the Shanghai FTZ fully demonstrates the vigorous vitality of China’s FTZs and the surging momentum of China’s economy,” said Zhu Zhisong, head of the Shanghai FTZ’s administrative committee. “On the new journey, we will actively implement the strategy of upgrading the FTZs, strive to enhance the leading force of institutional opening-up, deeply align with international high-standard economic and trade rules, and focus on key areas to carry out greater stress tests.”
Food, clothing, cosmetics, and even gearboxes, motorboats, large diesel engines, and other goods are orderly placed in different sections of Origin’s 15,000-square-meter high-standard warehouse.
Achievements over the Last Decade
According to Gu Xueming, president of the CAITEC, institutional innovation is the core and soul of the FTZs. The negative list for foreign investment at the FTZs now has only 27 items, compared with 190 in the first version in 2013. Restrictions on foreign investment have been lifted in a number of industries. The FTZs have explored a pilot free trade account system, opening up overseas financing channels for enterprises, and reducing financing costs. As of September 2023, the FTZs had already promoted 302 institutional innovation achievements across the country or in specific regions, covering investment liberalization, trade facilitation, financial openness, and whole-process supervision.
The Ministry of Commerce issued the Special Administrative Measures for Cross-border Trade in Services in Hainan Free Trade Port (Negative List) in July 2021, which is the first negative list issued by China in the field of cross-border trade in services. The Guangxi FTZ is striving to build a pilot demonstration zone to continuously deepen and expand cooperation with the Association of Southeast Asian Nations (ASEAN). The industrial cooperation has expanded from ASEAN’s traditional advantageous fields such as rubber to green chemicals and new energy materials. The Shaanxi FTZ continues to deepen people-to-people exchanges with the Belt and Road countries, uniting 151 universities from 38 countries and regions to form the University Alliance of the Silk Road, and creating cultural exchange activities such as the Silk Road International Arts Festival and the Silk Road International Film Festival. In 2022, the total import and export value of China’s FTZs was RMB 7.5 trillion, an increase of 14.6 percent year-on-year. The actual use of foreign capital was RMB 222.52 billion, an increase of 3.2 percent year-on-year, contributing 18.1 percent of the country’s utilization of foreign capital.
Giving full play to their positioning and advantages, FTZs have attracted high-quality resources worldwide, formed a number of world-leading industrial clusters, promoted the transformation and upgrading of industrial structure, and led high-quality development. The Yantai Area of the Shandong FTZ has developed special marine related industries, and independently developed and manufactured the largest deep-sea intelligent aquaculture cage platform in Asia, “Jinghai 001.” This has further enhanced China’s intelligent and high-end fish farming. The Guangdong FTZ is open to Hong Kong and Macao in the fields of finance, law, education, medical care, and construction. A total of 24,000 Hong Kong and Macao-funded enterprises have been established to serve the development of the Guangdong-Hong Kong-Macao Greater Bay Area. The Beijing FTZ attracts international talents to carry out innovation and entrepreneurship, and the first batch of 122 overseas vocational qualifications have been recognized. The Zhejiang FTZ has developed new forms of foreign trade, and its number of overseas warehouses for cross-border e-commerce ranks among the top in the country.
Corporate executives and experts who participated in the sub-forums and supporting activities of the sixth CIIE spoke highly of the FTZs. According to Covestro CEO Markus Steilemann, the company’s cumulative investment in China had exceeded €3.9 billion as of the end of 2022. Covestro is grateful for the support and policy innovation of the FTZs, which has provided impetus for its development, said Steilemann.
Michael Gelchie, CEO of Louis Dreyfus, believes that China’s FTZs have greatly encouraged foreign investment, accelerated two-way opening-up, and provided investors with effective trading methods and optional trading platforms. FTZs have created a strong environment for food exporters and importers, attracted capital, technology and talents, formed a cluster of corporate headquarters, and promoted the coordinated development of enterprises, said Gelchie.
The United Nations Conference on Trade and Development (UNCTAD) released a report on the role of China’s FTZs in promoting institutional innovation, industrial transformation, and South-South cooperation at the sixth CIIE, which is the first time that an international organization has released a special research report on China’s FTZs. Richard Kozul-Wright, director of UNCTAD’s globalization and development strategies division, believes that China’s opening-up is constantly upgrading, and the FTZs have made great contributions to the global economy by developing in a strategic and scientific way and adapting measures to local conditions. The experience gained during the process could help developing countries better cope with the challenges and is also important for South-South cooperation.
After 10 years of hard work, FTZs and the Hai-nan Free Trade Port have been flourishing very well. The report to the 20th National Congress of the Communist Party of China proposed to “implement the strategy of upgrading the pilot free trade zones.” According to Gu Xueming, the FTZs, from as experimental fields of the country’s reform and opening-up to as pilot platforms for comprehensive reform and opening-up, have taken on a more arduous mission. “In today’s era of great changes in social transformation, we call for practical exploration and theoretical breakthroughs using FTZs as the media. We also call for the exploration of an open path compatible with Chinese modernization in the process of building FTZs,” said Gu.
