China’s Free Trade Zones

Last updated: May 2021
The Financial Regulations Guide for Foreign Companies in China

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    China’s Free Trade Zones provide optimal conditions in which international companies can thrive. This article discusses the benefits of the China free trade zone, including registration requirements, financial services in China, and more.

    China’s Free Trade Zones

    Free Trade Zones (FTZ) are 21 areas across China, in which companies can operate under defined regulations, or more specifically, preferred conditions. The first China free trade zone was established in Shanghai in 2013, with the purpose of encouraging and facilitating international trade. Since then, another 20 FTZs have been set up, mostly along China’s eastern coastal line.

    Financial benefits

    As aforementioned, companies doing business in China in a FTZ are treated with favorable conditions. This includes mostly preferential customs and duty-free procedures such as:

    • Custom-free import – Companies operating in the special regulatory areas within the FTZ are not liable for any import taxes.
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    • Deferred payments – Duty payments can be postponed for companies operating in the special regulatory areas within the FTZ.
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    • Duty-free warehousing – Goods can be imported into China and stored in an FTZ’s bonded warehouse duty-free. Re-exported goods will be exempt from customs duties. Tax is levied on goods for domestic sales only.
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    • Fast-tracked custom processes – All companies registered in an FTZ can enjoy computerized, streamlined and less frequent custom inspections (excluding import and export processes).
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    • Loosened foreign exchange – All companies registered in an FTZ can open a Free Trade Account, which allows them to receive payments in RMB and foreign currencies. They are still subject to SAFE supervision, but it is more loosened and flexible.

    Business set up in China

    In the past, WFOE registration in a FTZ was much simpler compared to other areas throughout China. Nowadays, however, setting up a WFOE in China is quite similar nationwide.

    Industry clusters

    FTZs are known to approach specific industries and attract certain sectors. For instance, Shanghai FTZ focuses on financial services and pharmaceuticals, Sichuan FTZ promotes advanced manufacturing, Henan FTZ specializes in automobiles, etc.

    Companies from a certain industry operating in the relevant FTZ enjoy not only financial benefits but also the cluster’s side effects: knowledge sharing, networking, shared R&D facilities, local resources, and more.

    Requirements for registration in a FTZ

    Assuming your industry is not listed in the negative list for foreign investment, there are several requirements you need to meet, mostly pertaining to licenses, initial registration capital and professional management personnel qualifications. However, these requirements vary between different provinces and FTZs.

    Last updated: May 2021

    Regulations in China change relatively frequently. For the most up-to-date regulations, please check in with us.