Other ports eye Shanghai free trade zone model

Container trucks in the Yangshan Port in Shanghai. The State Council on Wednesday approved Shanghai's free trade zone, which will cover 28 square kilometers and offer world-class transportation and communications facilities and a tax-free environment. Provided to China Daily

Experts and officials hope zone will be copied in Tianjin, Shenzhen

Approval for a free trade zone in Shanghai on Wednesday has both inspired confidence and added a sense of urgency in some other coastal cities, notably Tianjin and Shenzhen, which harbor similar ambitions and have equally expansive plans.

The State Council approved Shanghai's free trade zone, which will cover 28 square kilometers and offer world-class transportation and communications facilities and a tax-free environment.

Shenzhen, which had container throughput of 21.7 million 20-foot equivalent units in 2012, already has a free trade zone. But it's small, and its operations are limited by regulatory and other constrains.

To the north lies Tianjin, whose ports handled 12.3 million TEUs last year. The city also has plans to expand its logistics capacity to cater for the demand of traders in northern China.

Logistics experts said that they welcome competition, and they noted that the facilities in the three ports serve the needs of different regional markets, which are individually large enough to support more than one FTZ.

The central government hopes the Shanghai zone will be promoted and copied to advance reform and opening up.

Shanghai Mayor Yang Xiong said Thursday during the Taipei-Shanghai City Forum in Shanghai that the city will seize the chance of building up an FTZ.

Yang said Shanghai will take the deepening of reform and opening up as a driving force of economic restructuring. Shanghai should also play its role as a pioneer in reform, said Yang.

Logistics companies are happy to embrace the new zone. The spokesman for United Parcel Service of America Inc said it "welcomes any policy that will help to promote the development of free trade, improve trade facilitation and accelerate stock turnover."

Zhang Jianhua, a senior manager at the Shanghai branch of the Shenzhen-based logistics company SF Express, said it is too early to say what benefits the FTZ will bring to logistics companies as such.

"We will wait for more detailed policies within the free trade zone before we make any further plans," he said.

Chu Xuejian, deputy director of the Shanghai Logistics Society, said approval of the zone is especially good news for the city, with the development of the existing Waigaoqiao Free Trade Zone and Shanghai itself reaching a bottleneck.

"It can be noted that the economic growth rate of Shanghai has been slowing down recently. The establishment of the free trade zone provides a perfect opportunity for Shanghai to seek new growth points.

"It is also in line with the municipal government's policy of 'retreating from the secondary industry and marching into the tertiary industry.' Modern service industries will be given a chance for growth and innovation," said Chu.

At the Waigaoqiao zone, companies have to go through two customs checks - at the port and at the FTZ - for clearance. This situation has prompted many multinational companies to turn to Hong Kong.

As of the end of last year, 403 multinational companies had set up regional headquarters in Shanghai, according to a government report delivered at the Shanghai People's Congress on Jan 27.

"Once the free trade zone starts operation, more and more multinational companies will be willing to make transitions to Shanghai. The trade flow will be smoother by that time.

"As long as the municipal government has a clear goal of combining the city's role of an economic, financial, shipping and trade center, Shanghai is sure to grow into the hinterland of Northeast Asia," said Chu.

Tianjin, for its part, expressed its intention of building up an FTZ long before China became a member of the World Trade Organization, which was in 2001.

The Tianjin Bonded Logistics Park obtained approval from the State Council in August, 2004. Ever since its dry run in May 2005, domestically made goods have been given tax reimbursement once they entered the park.

Authorities at the Dongjiang Free Trade Port Zone of Tianjin have aimed to transform the port into an FTZ, focusing on financial leasing, offshore finance and international shipping.

Yu Rumin, chairman of Tianjin Port Holdings Co Ltd, said during the "two sessions" (dual leadership meetings) of 2011 that "setting up a free trade zone based on the Dongjiang Free Trade Port Zone will be an effective way for Tianjin to further open up".

Shenzhen has sought to expand its FTZ over the years. It was the first Chinese city to establish a free trade zone.

The local authorities of the Yantian District of Shenzhen studied the feasibility of establishing a free trade zone as early as 2008. Li Xiuzhong, a member of Shenzhen People's Political Consultative Conference, wrote a proposal in 2010, calling for faster progress in establishing a free trade zone in Yantian.

Li wrote in the proposal that Yantian had met all the requirements to build up a zone by 2007. The container throughput of Yantian exceeded 10 million TEUs in 2007. By that time, Yantian had been the top among the 10 largest Chinese ports for more than four years.

Qu Jian, deputy director of a Shenzhen-based think tank, the China Development Institute, said that the city has been working very hard to get central government approval for a free trade zone.

Even though the FTZ in Shanghai has become the first of its kind in China, one more free trade zone in Shenzhen doe not mean duplication.

"For a large economy like China, it is of course better to have more free trade zones," he said.

"The area that a free trade zone covers is quite small, usually covering no more than 30 square kilometers. It is better to have one free trade zone in every economic region, such as the Yangtze River Delta region and the Pearl River Delta region, so that a complete network of free trade zones can be built up. Economic restructuring will be made possible under such a system," he said.