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Mar 24, 2021

The Chinese government is on a clear and defined path of opening-up the economy, with major structural reforms, macro-economic shifts and a more open business environment. The establishment of Free Trade Zones (FTZs) present an image of China’s proactive strategy of joining the trend of global economic development.

An FTZ is a defined territory within a certain country or region, in which special preferential tax and regulatory policies are implemented. From September 2013 to August 2020, China has declared 21 areas designated as FTZs across the country, to experiment new regulations and methods to improve business environment that could later be replicated nationwide.

Understanding China's Free Trade Zones

FTZs offer incentives to encourage more cross-border investments and trading. The Shanghai FTZ for example offers notable benefits to companies, such as:

  • Minimum investment necessary – You can open a business without having to own any physical office.
  • Easy entry – The FTZ encourages foreign investment, so you can benefit from various incentives offered.
  • 100% ownership – Including a local investor or partner in your business is no longer required, with the ability to create a WFOE (wholly foreign-owned enterprise).
  • VAT tax benefits – The government offers a rebate to exporters.

Understanding China's Free Trade Zones

More examples of Free trade zones incentives include:

  • Free investment – Opening up key industries to foreign investment by establishing the business registration conformation system.
  • Free capital – Integrating domestic and foreign currencies under free trade accounts and supporting foreign investors to establish financial institutions in China.
  • Globally competitive tax system
  • Quick flow of information – Improving internet infrastructure and bolstering the protection of intellectual property.

So far, the FTZs have proven to play a leading role in boosting China’s high quality development and facilitating the exploration of new models of opening-up the country’s economy.