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China Establishes Free-Trade Pilot Zone in Shanghai

The Shanghai municipal government unveiled the “China (Shanghai) Pilot Free Trade Zone” on Sept. 29. The zone is nearly 11 square miles in size, covering four existing special trade zones in Pudong district. This includes one trade zone at the airport which “seeks to free up the overloaded administrative approval system and introduce measures to encourage innovation and internationalization.”

The free trade zone is to serve as a testing ground for government efforts to upgrade financial services, promote trade and improve governance as well as measures to encourage foreign investment in 18 sectors in the country’s tightly regulated service industry. There are also plans to experiment with the convertibility of China’s tightly controlled currency, the RMB, and let market forces (rather than regulators) set interest rates.

USMEF has been monitoring the rollout of the free trade zone, which is primarily focused on the free trade of capital flows and not real goods. As such, the first batch of 25 Chinese and foreign companies were granted licenses to register in the zone, but there have so far been no changes in trade or customs duties. However, according to a Chinese customs official quoted in China Daily, a series of customs clearance and supervision policies have been initiated to offer more complete, convenient and transparent foreign trade services, and companies will be able to have cargo transported into warehouses before they declare customs. An AQSIQ official is quoted as well, pledging to “lower the threshold on inspection and quarantine” to help reduce costs in the zone. USMEF will provide further updates on the free trade zone as more details become available.