In late June, China's first independent car design company IAT Auto signed an investment framework agreement with Lin-gang Special Area to conduct its automotive research and development, manufacturing and export operations.

Xuan Qiwu, chairman of IAT Auto, which has worked with over 80 industry leaders including Honda, SAIC Motor and Li Auto for the past 17 years, said there were major reasons the company was setting up in the special area section of the China (Shanghai) Pilot Free Trade Zone.

Apart from an extensive transportation network linking Lingang to the rest of the country and the world, various opening-up policies introduced to improve global competitiveness were good incentives for the company to expand its footprint there, he said.

IAT's new facility will be located in Lin-gang's Yangshan Special Comprehensive Bonded Zone.

The bonded zone has already attracted a large number of well-established overseas carmakers such as BMW and Fiat Chrysler Automobiles to build design hubs, and international centralized procurement and distribution centers for auto parts. Establishing itself in the zone is expected to accelerate IAT's internationalization, as Chinese automotive companies become more outward looking, Xuan said.

Apart from overseas companies, Lin-gang is also home to a large number of domestic companies in the auto industry chain. The possibility of working with more companies is another major reason IAT was attracted to the area, Xuan said.

In 2023, more than 1.1 million intelligent connected cars were churned out in Lin-gang, with the industry's annual output exceeding 300 billion yuan ($41.9 billion), which is 10 times the size in 2019.

Big players, big benefits

US electric vehicle maker Tesla can take a big part of the credit for progress made by the industry in Lin-gang. By launching a gigafactory in Lin-gang in 2018, Tesla helped build a full industry chain for intelligent connected car manufacturing in the special area.

More than 180 companies have been providing auto parts or services to Tesla's gigafactory. Of those, 105 are based in 24 cities in the wider Yangtze River Delta region. Tesla's 40 gigawatt-hour energy storage project, also located in Lin-gang, is scheduled to be operational by the end of this year.

With a whopping 50 billion yuan in investment, Tesla's gigafactory is the largest foreign-invested manufacturing project in Shanghai.

More significantly, the massive project involved large and complicated construction work, which in the past usually resulted in a lengthy process to complete administrative approval.

However, Lin-gang allowed Tesla to start construction first and submit the documents later, as long as all the approval procedures were ultimately met. This allowed Tesla to start construction of the facility, put it into use as soon as possible, and churn out the inaugural vehicle in the first year of the factory's operation.

Wu Xiaohua, deputy-secretary of the Party working committee of the Lin-gang Special Area, said the seemingly miraculous speed at which Tesla achieved this feat reflected Lin-gang's dedication to improving the business environment. This also gave the market a glimpse of China's resolve, and the actions taken to expand the country's opening-up.

Tesla's vice-president Tao Lin said the multiple institutional innovations introduced in Lin-gang were another major reason Tesla's operations were galloping ahead there.

"The institutional advantages not only help companies land new projects rapidly, but provide nonstop vitality for the companies' operations, which is as important," she said.

Over the past five years, Lin-gang has realized 138 institutional innovative cases covering free trade, investment, cross-border finance and high-end shipping. Just as importantly, 70 of these cases were the first of their kind in China.

Boeing Shanghai Aviation Services' modification and maintenance businesses in Lin-gang is one of the latest, and best, examples of institutional innovation.

On June 20, the project set a record for Shanghai by completing the process of signing land contracts, gaining construction permits and starting operations within five hours.

To make that possible, Boeing Shanghai took advantage of 13 policies relating to engineering construction projects from Lin-gang's latest review and reform measures.

The presence of the industry giant will help Lin-gang expand the civil aviation industry, one of four frontier industries targeted in its development along with integrated circuits, artificial intelligence and biomedicine.

Path of exploration

As a special economic zone, Lingang should undertake more experiments in institutional arrangements, improve weak links and explore new development paths, municipal government officials said at an executive meeting in late July.

It should also take on more special functions and further improve institutional mechanisms to attain these goals, they added.

Chen Jinshan, director of the Lingang Special Area Administration, said the zone will seek more institutional innovations by aligning itself with high-standard international economic and trade rules. Chen cited as examples the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement.

Lin-gang will also conduct more "stress tests" — experiments to test how far the reform can go by including possible challenges and difficulties — on cross-border data, cross-border finance, value-added telecommunications and high-level shipping, he said.

One stress test has already been conducted this year on cross-border data flow in the connected cars, mutual funds and biomedicine sectors, and released in May.

Companies registered in Lingang, or other areas of the Shanghai FTZ, can apply for general data cross-border flow services in 11 scenarios specified on a list. However, the data transfer activities must be conducted within Lin-gang.

US carmaker Ford has benefited from the new list, which is the first of its kind in China. Wu Ji, head of information security and data compliance at Ford China, said if one of its cars sold in China needs maintenance, the company needs to transfer the vehicles' information back to its global headquarters to get technical support.

The new list classifies global aftersales services under the cross-border data flow scenario. This means Ford can now provide these services more conveniently, Wu said.

Shen Yi, a professor of international politics at Fudan University, said the list was "down-to-earth and elastic", and stressed its importance to stimulating economic growth. "Cross-border data flows are now a prerequisite for industry development," he said.

"But the compliance cost for such activities cannot be overwhelming for companies. The new list, which is quite exceptional from a global perspective, has provided a list, with limits, that will meet economic development needs because it is based on real business scenarios," he said.

It is also important that Lin-gang was chosen as the location for such an experiment, Shen said.

"Risks cannot be completely avoided while seeking economic development," he said. "The solution is not to eliminate risks, which is impossible, but to strike a balance between development and security, and control risks within a tolerable range."

When it comes to cross-border data flow, no institution, regulatory body or company can come up with a ready-made solution. Also, technologies and application scenarios evolve and upgrade rapidly, Shen added.

The list rolled out in Lin-gang is a realistic solution, he said. "It is through experiments, and maybe mistakes, that progress can be made," Shen said.

A second list covering insurance and shipping will be released in August, said Chen from the Lingang Special Area Administration.

Population growth

The expansion of industries and new businesses, coupled with economic dynamism, has propelled Lin-gang's population from 440,000 in 2019 - when it was upgraded to become part of the Shanghai FTZ - to over 600,000 today.

The government's efforts to attract fresh talent to the area have also played a big role.

Over the past five years, Lin-gang has issued 1,110 work permits for expatriates and approved permanent residency for another 79 foreigners. Overseas returnees have set up 270 companies in the special area.

From July 12, Lin-gang took the initiative of issuing China's first e-visas. With the entire application process completed online, a digital visa can be issued within three days.

An e-visa is valid for a single entry, with an entry validity of 15 days and a period of stay not exceeding 30 days.

Yang Wu, deputy director of the human resources department of Lin-gang Special Area Administration, said such measures can help overseas professionals set up businesses and conduct trade.

Ye Wei, head of the port visa office at the Exit-Entry Administration Bureau of Shanghai Public Security Bureau, said they had worked with the Lin-gang administration to keep records for 1,300 companies to help with their future needs. Similar initiatives are expected to eventually be implemented outside Lin-gang, he added.

Over the past five years, Lin-gang has attracted more than 97,000 professionals. Over 27,000 new talents have settled in Lin-gang in the first seven months of this year, a 41 percent year-on-year increase.

A total of 1,132 companies have registered for the online job market launched by Lin-gang administration in early 2023, which has detailed over 8,000 job opportunities and received 146,200 resumes.

Credit, where credit's due

To help technology startups stabilize their core research and development and further boost innovation, Lin-gang introduced a new type of loan early last year.

Tech companies can use the loan for stock ownership and equity incentives. Companies from the integrated circuits, artificial intelligence, biomedicine, electronic information, life science, high-end equipment and advanced materials sectors can apply for the loans as long as they have at least one technological achievement already acknowledged by the government.

By the end of June, 16 Lin-gang-based companies had applied for the new loans, and eight had already received them. In September 2023, the pilot program was extended to Zhangjiang, another part of Shanghai with a cluster of pharmaceutical companies.

More practical measures are also being introduced in Lin-gang to retain and attract talent. Over 2,200 people from 200 companies have been approved for home subsidies totaling 50 million yuan, to settle in Lin-gang. Another 2.5 million yuan in rental subsidies has also been granted to nearly 300 people.

Meanwhile, construction of Dishuihu School, a public school covering 12 grades, started in March. It will receive its first primary and middle school students in 2025. With a total investment of 2.34 billion yuan, the school will support the families of workers and offer courses in subjects such as AI and IC to cater to Lin-gang's development needs.

During a visit to the area in late July, Shanghai's Party secretary Chen Jining compared Lin-gang to a vigorous and adventurous "little tiger", and said it should strive to complete the reform and pioneering tasks assigned to it by the government.

The special area has the potential to grow into a vibrant growth engine for Shanghai by attaching greater importance to soliciting new businesses and investment, introducing fresh talents, nurturing new industries and consolidating its existing advantages, he said.

"By aligning with China's major development strategies, Lin-gang should initiate more reform and lead further opening-up. More new quality productive forces and world-class industrial clusters should be nurtured here by giving full play to its advantages in institutional innovation and continued opening-up," Chen added.