China on Tuesday announced the expanding of its Shanghai free trade zone (FTZ) in its latest major strategic move for further opening-up.
The addition of the Lingang area is a major strategic decision made by the Communist Party of China Central Committee to further opening up, Vice Commerce Minister Wang Shouwen told a press conference Tuesday.
It also demonstrates China's clear stand to adhere to all-round opening up in the new era and an important measure taken to actively lead the healthy development of economic globalization, Wang said.
The new Lingang section will match the standard of the most competitive free trade zones worldwide and implement opening-up policies and systems with strong global market competitiveness, according to an overall plan for the new Lingang area of the China (Shanghai) Pilot Free Trade Zone issued by the State Council, or the cabinet.
Lingang, with a start-up area of 119.5 square kilometers, will facilitate overseas investment and capital flows and realize the free flow of goods, according to the plan.
"The new area is not just a simple expansion of the existing free trade zone and a copy of existing policies. It is comprehensive, profound and fundamental institutional innovation and reform," Chen Yin, executive vice mayor of Shanghai, told the press briefing.
The Shanghai FTZ had an area of 28.78 square kilometers when it was established in September 2013 and expanded to 120.72 square kilometers in December 2014.
Over the past years, the Shanghai FTZ has made remarkable progress in its bold exploration in sectors like investment, trade and finance and contributed precious experience to the all-around deepening of reforms and high-level opening-up, said Wang.
The area will be built into a special economic function zone with global influence and competitiveness, to better serve the country's overall opening-up strategy, the plan says.
"The status as a special economic function zone means that it is not adding more facilitation but moving toward real investment and trade liberalization," said Shen Yuliang, a researcher with the Institute of World Economics under the Shanghai Academy of Social Sciences.
By 2025, the Lingang area will have a relatively mature institutional system of investment and trade liberalization and facilitation. By 2035, it will be built into a special economic function zone with strong global market influence and competitiveness, becoming an important platform for the country to integrate into economic globalization.
The area, administered like a special economic zone, will establish an institutional system with its focus on investment and trade liberalization and set up an open industrial system with global competitiveness, according to the plan.
It will strive to become a business cluster for international business, cross-border financial services, frontier technology research and development and cross-border services trade, and speed up the industrial upgrading of existing companies.
The Yangshan comprehensive bonded area will be set up there, and the area will also pilot free capital inflows and outflows and free capital conversion.
Income tax shall be levied at a reduced rate of 15 percent within five years from its establishment for qualified enterprises engaged in manufacturing and R&D in key fields including integrated circuits, artificial intelligence, biomedicine and civil aviation, says the plan.
Shanghai will also set up a fund of 100 billion yuan (14.2 billion U.S. dollars) in five years to support the development of the new area, said Chen.
OPENING-UP, INNOVATION LEADER
The plan says the new area will be granted greater administration power for self-development, self-reform and self-innovation, and regularly promote its experience to spearhead a new round of reform and opening-up of the Yangtze River Delta.
Apart from serving the Belt and Road Initiative and the Yangtze River Economic Belt, the new area is also designed to promote the coordinated development, reform and opening-up of the Yangtze River Delta, said Wang.
The Lingang area, home to Tesla's gigafactory, has become a cluster of high-end industries after more than a decade of development, and it now emphasizes the development of key industries like integrated circuits, AI, biomedicine and civil aviation.
China's economy faces complicated external situations and to improve industrial competitiveness and move up the value chain, the boost of scientific and technological innovation capacity is the only way, said Yin Chen, secretary general of the Shanghai Free Trade Zone Comprehensive Research Institute with Fudan University.
With more openness, the new area can boost Shanghai's high-end resources allocation ability and better represent the country to take part in global cooperation and competition, said Yin.
BOON FOR BUSINESSES
The addition of the new area to the FTZ is a boon for both domestic and foreign businesses.
"The new tax policy support will help speed up the commercialization of autonomous driving,"said Xue Jiancong, vice president of TuSimple, an AI company registered in Lingang that received the country's first open road testing license for trucks.
"We hope that the new policies will help promote the free flow of auto parts,"said Song Feng, president of Caterpillar Remanufacturing Services (Shanghai) Co., Ltd., citing current restrictions on imports of old machinery parts.
Yu Bo, a tax partner at accounting firm PwC, said China has been rolling out institutional reforms over the past years to allow domestic institutions in alignment with international standards.
China, among the top three investment destinations with the biggest development potential for business executives worldwide in an PwC survey, should continue to improve the business environment for foreign investment and conduct more institutional reforms to promote the higher-level opening-up, said Yu. Enditem