Free Zone Setup | China

China Free Zones

Free trade zones (FTZs) are types of special economic zones (SEZs) where goods may be imported, handled, manufactured and exported without direct intervention from customs.

Each FTZ in China has an industrial and economic focus, with different incentives to fulfil its objectives. Incentives and regulations in FTZs align with the Chinese government’s ongoing policy priorities. According to the Chinese Ministry of Commerce, in 2021, China's 21 FTZs contributed 17.3% of China’s total foreign trade (Rmb 6.8 tln) and 18.5% of China’s foreign investment inflows (Rmb 213 bln).

Benefits of China’s FTZs

Favorable administrative measures

  • Reduced corporate income tax (CIT) (varies by FTZ)
  • Duty-free imports and exports
  • Bonded warehouse capacity
  • Streamlined port and customs operations
  • Simplified company registration
  • Faster value added tax refund
Optimized business environment

  • Targeted policy liberalisation in specific industries
  • Purpose-built clustered industrial zones
  • Reduced foreign exchange controls
  • Additional liberalisations per Foreign Investment Law
Strong human capital

  • Subsidies and tax benefits for recruitment of highly skilled workers
  • Partnerships with universities to nurture young talents locally

Opportunities

China uses FTZs to pilot new policies and regulations, thus permitting companies to experience more liberalised environment, with potentially lighter regulatory touch. Many international companies found FTZs an attractive option to set up China operations, depending on their industry. While FTZs in Shanghai and other prime Chinese cities have seen initial success, FTZ in Tier 2 and Tier 3 cities have distinct advantages with large pools of young skilled labour, lower costs and access to large regional markets beyond China’s coastal areas that are often overlooked. Many of the FTZs, such as Chongqing, Sichuan, Shaanxi and Henan focus on areas that are Canada’s strengths.