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Doing Business in Free Zones in China

Updated on Thursday 26th November 2020

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Import-and-Export-in-China.jpgThere are 66 free trade zones in China that address to foreign investors looking for special business conditions among many other things. Considering the success of these important free zones in China, the government continues to develop even more centers like these by the end of 2020. If you would like to know about how business is done in China’s free trade zones and the ways in which you can register a company, we kindly invite you to talk to our team of company formation agents in China.
 

What are China's main free trade zones?

 
Each free zone in China is named after the municipality or province it is established in followed by the term FTZ (Free Trade Zone):
 
  • Henan FTZ – 4
  • Shaanxi FTZ – 7
  • Shanghai FTZ – 8
  • Hubei FTZ – 5
  • Chongqing FTZ – 1
  • Zhenjiang FTZ – 11 
  • Fujian FTZ – 2
  • Guangdong FTZ - 3 
  • Sichuan FTZ – 9
  • Liaoning FTZ – 6
  • Tianjin FTZ – 10
 
Even though the business focus is on the seaports in China, the authorities have decided to also concentrate on the free trade zones which can be developed inside the country and the ways in which the economy can be even better sustained.
 

The reasons for opening a business in China’s free trade zones

 
The attributes of the free trade zones in China are important to foreign investors who want to benefit from lower tax rates or who are interested in developing their operations in a reliable and prolific manner. The following aspects can describe the reasons why entrepreneurs decide for opening companies in the free zones of China:
 
 
  • duty-free warehousing is at the disposal of foreigners in China’s FTZ before importing goods in mainland China;
  • there are specific laws regarding the cross-border e-commerce in Chinese FTZ;
  • there are no strict policies on the websites and social media channels;
  • small grants or bonuses are offered to investors in free trade zones in China;
  • a series of incentives and governmental policies are offered in FTZs.
 

Activities in China’s FTZs

 
Henan FTZ was created to develop the traffic and logistics system for an important project named “One belt, one road”. Guangdong free trade zone acts as a pilot zone for hi-tech companies, financial firms and sustains the business collaboration with Macao and Hong Kong. The shipping activities and the tourism activities with Taiwan are promoted with the help of Fujian Free Trade Zone. This is where a part of the Maritime Silk Road develops. Chongqing Free Trade Zone is representative for high-end manufacturing and tariff-free services, besides being a significant center that connects the “Yangtze River Economic Belt” with “Western Development” and “One belt, one road”. Hubei Free Trade Zone sustains the industrial transfer and promotes the development of “Yangtze River Economic Belt” where foreign investors already offered their support in terms of business. As for Shaanxi FTZ, this is extremely representative because it sustains the cultural and educational exchanges, the technological agriculture and the high technology in these areas. Shanghai Free Trade Zone is one of the most important FTZs in China which focuses on financial services, international shipping, and which is open to an offshore tax structure. A free trade logistics park and an important airport are part of Shanghai FTZ. Foreign investors might be attracted by Sichuan FTZ with a total area of 120 km 2 and varied business opportunities sustained by modern services and technologies. Having a business in FTZ in China means knowing the rules and regulations in this direction which can be entirely explained by our team of consultants in China, at any time.
 

Attracting international investors in China’s FTZs

 
Growing the attention of foreign investors in China have made the authorities develop many free zones with lots of advantages, among which the ones related to the taxes are extremely significant. Complete access to cross-border countries and lower taxes, plus exemptions for specific import and export operations. Wholly foreign-owned companies or WFOEs as they are known can be easily registered in the free zones in China, and company owners can benefit from complete ownership and control in the firm. This is also an important advantage for foreign investors in China.
 

The characteristics of SEZ in China

 
The special free zones in China are directed to those kinds of investors who want to protect their assets and take advantage of special tax incentives and complete control of their assets and company. International companies interested in placing their operations in the import and export field should direct the attention to the special economic zones in China and set up joint stock companies, joint ventures, and wholly foreign-owned enterprises. Having complete independence and being sustained by the Chinese authorities, the special free trade zones in China sustain the economy in the country in a large amount, the FDI and the exports being on a positive trend in the past decade. We remind that the Chinese WFOE formation can be explained by our team of consultants in China.
 

Short facts about the free zones in China

 
 
The industrialization in China started a few decades ago when the government started a series of initiatives to support the economy and develop specific regions in the country. The first special economic zones developed in 1984 with the appearance of 14 coastal cities which were established as free trade zones: Beihai, Guangzhou, Wenzhou, Zhanjiang, Ningbo, Fuzhou, Nantong, Shanghai, Qingdao, Dalian, Lianyungang, Yantai, Tianjin, and Qinhuangdao. Considering the success of these free trade zones, the Chinese authorities decided on establishing other special areas part of the coastal belt: Pearl River Delta, Yangtze River Delta, the Shandong Peninsula, Hebei Province, Xiamen-Zhangzhou-Quanzhou, the Liaodong Peninsula and Guangxi. Here are a few facts about the free trade zones in China:
 
  • all special economic zones were created with the idea of sustaining the country’s economy with the help of foreign investments in large, medium and small-sized cities in China. 
  • the high-tech industrialization started in 1992 with varied and privileged rules among which, the possibility of trading in foreign exchange in the import and export sector. 
  • lower tax rates, different administrative schemes and the ease of doing business where only a few of the business strategies which developed in China back in the ‘90s. 
  • for instance, Shenzhen, one of the special economic zones in China, registered up to 40% of the city’s total industrial value, approximately CNY 82 billion in 1999. 
 
Special policies were developed and implemented, mostly directed to the income tax and the customs duties. Also, since the 2000's, foreign investors were allowed to set up financial institutions in China. More than that, Shanghai, a special economic zone in China, had the permission of the Chinese authorities to set up a stock exchange and approve foreign investment funds. In addition, businessmen took advantage of the double taxation treaties signed by China with numerous countries around the world to avoid paying twice the taxes on incomes.
 

Opening a company in Tianjin free zone in China

 
Tianjin free zone hosts a large number of foreign companies that benefit from a series of business advantages. Opening a WFOE in Tianjin is quite simple for international entrepreneurs who want to develop import and export activities, set up a logistics and warehousing business, or open a manufacturing enterprise, to give a few examples. The business activities developed in this important free zone are overseen by the Tianjin Commission of Commerce, Tianjin Bureau of Inspections, Tianjin Commission of Transportation, and Tianjin Customs. These are the most relevant committees in Tianjin free zone, one of the most prolific and highly appreciated business destinations in China. You can discuss with one of our company formation agents in China and find out more about the business in China.
 

Business in Shanghai free zone

 
Shanghai FTZ is another important and productive free zone in China and home to a big number of companies from overseas. The relaxed investment legislation and the possibility of opening a company without considering a minimum share capital at the time of registration of a WFOE in Shanghai FTZ. The one-stop application platform is offered to persons interested in starting a business in Shanghai free zone, while the special licenses and permits are easy to get. There are simplified procedures related to the way a company is incorporated in Shanghai free zone, representing a huge advantage to those who want a fast start on the Chinese market. However, it is recommended to have the support of a specialized team of agents in China who know how to work with foreign entrepreneurs in this part of China.
 

Is Zhuhai a special economic zone in China?

 
Yes, Zhuhai is a special economic zone in China that offers a wide range of advantages to international and domestic companies established here. The business climate is excellent, particularly for those engaged in sectors like IT, pharmaceuticals, ocean-based industries, manufacturing machinery, and many more. Zhuhai-Macau Cross-Border Industrial Park, Hengqin New Area, Zhuhai National Hi-Tech Industrial Development Zone, and Zhuhai Economic and Technological Development Zone are 4 important and prestigious business development zones in Zhuhai that attract foreign investors in a large number each year. The good news about these development zones is that companies that invest in the R&D sector in China are granted RMB 2 million as encouragement. Moreover, the tax regime is favorable in this special economic zone, with the corporate tax rate being settled at 15%. If you would like to discover more benefits of Zhuhai Special Economic Zone, you can get in touch with our team of company formation specialists in China. We will gladly help you and handle the related company formalities.
 

Is it hard to open a business in China’s free zones?

 
No, there is no need to worry about how you can open a company in China because the formalities are simple and straightforward. Plus, you will have the support of our team of specialists in company formation in China, regardless of the chosen free zone in this country. In matters of business benefits and investments, China provides a wide range of advantages that compete with international hubs at any time. The attention of the authorities was concentrated on the ease of doing business in China’s free zones by developing the infrastructure and the international connections with the most important markets, the simplified formalities related to company formation, an advantageous tax regime, skilled workforce available, and many more. It might be difficult to choose just the right type of free zone for further operations, yet, investors are suggested to analyze each zone and to concentrate more on the advantages offered. The incentives offered to foreign investors in this country are great and appealing from the start. We have gathered some interesting facts and figures about China’s economy and business direction:
 
  1. Around 1,769 billion was the total FDI stock for China in 2019.
  2. China represented the second largest FDI recipient in the world after the USA, in the same year.
  3. The 2020 Doing Business report ranks China 31st out of 190 economies in the world.
  4. The economic reports for 2019 and 2020 show that China was one of the top 10 economies that improved most.
 
Doing business in the free trade zones of China is both easy and convenient, especially for entrepreneurs who would like to protect their assets from a taxation point of view. If you would like to open a company in China’s free trade zones, we kindly invite you to contact our team of company formation specialists in China and solicit comprehensive support in company formation.
 
 

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