China's WTO Updates
Free Trade Zones to Improve

China's entry into the World Trade Organization will not mean the end of its 15 free trade zones but a chance for their improvement and perfection, according to an official with the administration of Tianjin Port Free Trade Zone.

Feng Zhijiang, deputy director of the administrative committee of the free trade zone, said, "Free trade zone is still a popular thing in the world, and it will play a more important role in China as the country completely opens up to the outside world."

About 50 kilometers from the city of Tianjin and 170 kilometers from Beijing, the seven-square-kilometer Tianjin Port Free Trade Zone has developed from a bleak sea shore to a lucrative home to about 4,000 domestic and overseas enterprises in 10 years.

By the end of 2000, the trade zone had attracted about US$5 billion investments, ranking after only Shanghai Waigaoqiao in the country. About 80 percent of the investments were foreign investments.

After opening Shenzhen and other three coastal cities in South China as special economic regions and then dozens of economic and technological development zones in the 1980s, the country introduced free trade zones in the early 1990s in 15 coast cities, including Shanghai, Guangzhou, Shenzhen and Tianjin.

These specially carved out cities and zones served as the country's centers to embrace foreign investments and international way of economic and trade practice.

Often located around major seaports, free trade zones are said to be "inside the territory but outside customs," - companies registered here are exempt from complex customs regulation and tariffs and value-added taxes; they also enjoy a series of preferential treatment as in other special economic areas.

Since the local governments spent about 40 billion yuan (US$4.8 billion) to build the free trade zones in areas totaling 22 kilometers, a large number of domestic and overseas companies have settled down there. By now, the contractual investments have amounted to more than US$16 billion.

But people were worrying that when China enters WTO and gradually lowers the high tariffs to a moderate level, the free trade zone's duty-free policies may lose their edge.

"The zones are facing challenges when the country gradually lifts quotas of various imported goods and brings the tariff to a relatively low level," said Zhong Weilin, deputy director of the administrative committee of Shanghai Free Trade Zone.

He was attending a seminar last month with representatives from other 14 free trade zones, who gathered in Shenzhen to discuss the future of the free trade zones after China's admission into WTO.

The companies might reconsider where their investment should go when preferential policies on duties or taxies are no longer too much different, Zhang said.

But Feng Zhijiang, who was also present at the Shenzhen seminar last month, said the tariffs are not the major element for free trade zones to attract foreign investments.

The meaning of free trade zones' existence lies in their efficiency in processing goods, the speed to finish the customs procedures, the capability of cargo flow distributions, Feng said.

The free trade zones, which often have convenient geographic advantages and long been good at cargo processing and distribution, will develop themselves into distribution and trade centers for imports and exports.

He said it was true that the decade-old free trade zones in China still had much to do as the country lacks experience and a set of laws were still not in place.

In the developed countries the free trade zones are directly administrated by the national governments, and all activities are governed by law. While in China, the zones are watched by local governments, and what can be referred to are only some policies and regulations.

It is urgent for the central government to draft a law regarding free trade zones so as to adjust the domestic trade zones onto the international track when the country joins WTO, Feng said.

(China Daily August 1, 2001)


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