What Has Shanghai FTZ Done to Support and Revitalize Offshore Trade?

Opened in September 2013, the Shanghai Free-Trade Zone (FTZ) was the first free trade zone to open on Mainland China. Since then, it has been expanded twice, in 2015 and 2019. But what efforts have been made to support and revitalize offshore trade?

The purpose of the Zone was to encourage free trade. And it has but to a certain extent. Some industries, like the wine industry, have been able to benefit a lot from the Shanghai FTZ. China is home to a rapidly growing market for wine. Shanghai FTZ has facilitated this by allowing high-priced wines to be brought into China and be sold on auction with no duty or customs clearance, as long as the product stays within the Zone’s four bonded areas. While still limited, Shanghai’s big market alone made plenty of sense to do business.

There has also been a legitimate, but somewhat restrained effort to facilitate the ease of trade between the FTZ and offshore partners. One challenge many businesses face while dealing with a nominally communist country is currency. Shanghai FTZ has eased this process by allowing yuan convertibility and unrestricted foreign currency exchange while permitting a tax-free period of ten years for businesses to streamline the process of foreign direct investment. By strengthening strategic cooperation, Shanghai FTZ was able to achieve good results.

Overall, the Shanghai FTZ has done a significant amount to support offshore trade. But while many of the rules are different in the Zone, it’s still a part of China. Initial hopes that China’s Internet restrictions would not be present in the Zone did not go through. Telecommunications is still quite restricted in the Shanghai FTZ, but foreign investment is being allowed in “non-core telecom services”.

Shanghai FTZ is a good example of why China should establish more free trade zones. However, this may not happen anytime soon due to the current political atmosphere. Whatever the future holds, Shanghai FTZ still offers an effective way for foreign businesses to access China. But capitalizing on Shanghai FTZ remains a challenge.

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