China Expands Shanghai FTZ to Attract More Hi-Tech Firms
August 16, 2019 | BY
Marilyn RomeroThe newly incorporated Lingang New Area into Shanghai’s Free Trade Zone, will offer investors tax cuts, duty exemptions and other preferential policies.
China’s State Council has agreed to expand the Shanghai Free Trade Zone, or FTZ, by transforming the Lingang New Area into a special economic functional zone with international market influence and competitiveness by 2025. According to the plan, the new area, which will be developed on the southeastern tip of Shanghai to the south of the Dazhi River and Pudong International Airport, will promote more activity in trade, investment, finance, talent development, and information exchange.
Expansion of the Shanghai FTZ was first proposed in November 2018 by Chinese President Xi Jinping who said at the time that he considered it an “important strategic measure” to help promote the country’s reform and opening-up policies. To achieve the goal, Shanghai is setting up a special development fund to inject at least Rmb100 billion, or $14.2 billion, to construct the zone over the next five years.
Investment in the technology sector will be strongly targeted. Companies specializing in industries such as integrated circuitry, artificial intelligence, biomedicine and civil aviation, will be granted a 15% business income tax rate for five years after their registration in the Lingang New Area, instead of the usual 25%. Chinese authorities are also studying the feasibility of implementing subsidy policies for the personal income tax of expatriate hires; and are exploring tax policy arrangements for pilot, free trade accounts, said the plan.
In addition to these preferential tax policies, the Lingang New Area will also roll out beneficial policies in areas such as cross-border financial management, cross-border RMB financial services, international transportation and international internet data flows.
The new area will be given greater authority over autonomous development, reform and innovation, according to vice commerce minister Wang Shouwen. Additionally, the Lingang New Area will become a pilot area for the 11 new rules introduced to further open up the financial sector, which were recently announced by the State Council’s financial stability commission.
Shanghai’s FTZ has proved very popular and has already been expanded before. The first expansion occurred in late 2014, when the area’s original 28 square kilometers were increased to 120 square kilometers by including neighboring parts of the Pudong district in which it lies. Already at this early stage of the planning of the Lingang extension, Shanghai executive vice mayor Chen Yin said that the proposed area has already attracted interest from a number of big local and foreign firms, including car maker SAIC Motor Corp.; Shanghai Electric; Sany Heavy Industry; Siemens; Caterpillar, and General Electric. Detailed implementation rules from the local government are expected to be released soon.
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