Beijing's culture free port to open?

China's art market to see potential boost from free trade zone

"A free trade zone is not a freeport," said Shen Mingchu, the deputy president of Beijing Gehua Cultural Development Group, referring to the recent discussion stirred by a report from The Art Newspaper with the headline, "Beijing to get freeport to challenge Hong Kong's supremacy."

The Gehua group and the management committee of Beijing Tianzhu free trade zone have jointly established a culture free trade zone in Tianzhu, near Beijing Capital International Airport.

The project, which aims to promote cultural communication and trade by offering different levels of policy advantages in that area, was supported by the people's government of Beijing and the Ministry of Culture.

Changing policies

Since the ground-breaking ceremony in March, discussion about the free trade zone has not stopped.

In April, China changed its policies surrounding custom duties. The tariff rate on artworks was reduced but supervision became tighter.

A few large transportation companies providing services to auction houses faced pressure from customs. The 17 percent value-added tax did not change.

Many art collectors and auction companies have complained about the changing policy in China while anticipating the arrival of a free trade zone to bring in relief for the market. 

The free trade zone will allow international companies to exhibit, trade and hold auctions for cultural products, tax free in the given area. Many see this as a positive influence on the Chinese mainland art market.

"People are unclear about the idea of a free trade zone. It has little effect on collectors who want to bring art to China," said Shen, who explained that the concept of a free trade zone was mistaken by many media organizations as a "freeport".

"The cultural environment in Beijing is not comparable to Hong Kong. The art transaction market is mature in Hong Kong, a real free port," said Shen.

Convenience for consumers

The free trade zone consist of three parts: An international exhibition and trade center for cultural products, a cluster for trading enterprises, and a logistics center for storage and delivery. In total, the area will be 173,300 square meters.

Shen said the idea is to provide a platform for creative industries around the world to communicate, exhibit and trade with each other.

"For example, many domestic films were sent abroad for post-production, because we lacked the required high-tech editing equipment. With the free trade zone, there is no need to send our films abroad or worry about the high tax of importing expensive machines. It can be done within the zone in Beijing," said Shen.

He explained that people usually connect tax issues with the art industry, but in fact the art market is not the only industry that will enjoy the benefits of a free trade zone.

The free trade zone can also hold international events such as film festivals, book fairs and art festivals.

Wang Xiaowen, vice general manager at Beijing Googut Auction Co. Ltd is optimistic about the impact of a domestic art free trade zone.

"It is a good thing, especially as the tax policy is becoming stricter. Many collectors store their collections in Hong Kong and Singapore. If we have a free trade zone for storage in China, it would be more convenient," said Wang.

Wang also said that trading in free trade zones reduces costs. "Let's say consumers come back from abroad with a bottle of quality red wine. If there is a classy restaurant in the zone, they can just consume the wine at that restaurant without paying taxes." 

Wang added that the storage services in the free trade zone will prove useful. Since it is unsafe to store expensive art at home, many people will take advantage of storing and managing artworks at another location.

Having a place for professional artwork storage encourages some to bring Chinese art back from overseas.

Wang said that a free trade zone would help promote the Chinese market, but in terms of having an actual effect on auction companies or tax policies - this will only be revealed through time.

Contentious voices

As the project is still in construction, critics are raising concern about the location and services of the free trade zone.

Liu Shangyong, the general manager of Beijing Rongbao Auction Co. Ltd said the location of the free trade zone was poorly chosen, as the distance away from the city center is disadvantageous in attracting people.

He said that people hope to have an enjoyable environment and quality facilities and services when attending an auction. More importantly, Liu added that the free trade zone does not offer preferential tax policies.

"If you buy a piece and want to get it out of the free trade zone, you still need to pay tax," Liu said. 

Sun Cong, a collector who owns an antique shop in Jinzhou, Liaoning Province told the Global Times that the factors that influence collectors are complicated.

Sun travels often between Europe and China to purchase items for his antique shop. Tax policies affect  customs, applying for relevant documents, providing receipts to auction companies and many other procedures. These procedures will remain unaffected by a free trade area.

"The free trade zone may benefit big auction companies, not collectors or small businessmen like myself ... I sell antiques in China, so taxes are unavoidable."

Sun said he cares more about policies that are relevant to him. But he agrees that a free trade zone would provide more opportunities in the grand scheme. 

Shen said that Gehua group is currently in conversation with a few international companies. The project is planned to be completed by 2015.