China’s Free Trade Zones: Powering Global Economic Growth

News by AUN News correspondent
Tuesday, August 08, 2023
AUN News – ISSN: 2949-8090

Summary:

• In October 2022, Albemarle Corp. invested $200 million to establish Guangxi Albemarle Lithium Co. in China’s FTZ.
• This move leverages FTZ benefits such as integrated transport, streamlined customs, and tax incentives.
• China’s 21 FTZs have significantly bolstered foreign investment and trade, contributing to the nation’s economic growth.
• These zones play a pivotal role in cross-border logistics, exemplified by the China-Europe freight train’s success.
• The FTZs span diverse regions, each with distinct strategic goals.
• The government aims to align some FTZs with international trade agreements, fostering innovation and growth for a promising future

In October 2022, the Port of Qinzhou in the Guangxi Pilot Free Trade Zone (FTZ) witnessed a significant milestone in international business. Albemarle Corp., a U.S. specialty chemicals giant, invested a substantial $200 million to establish a new company, the Guangxi Albemarle Lithium Company Limited. This strategic move came after Albemarle’s acquisition of a local new energy material manufacturer in south China’s Guangxi Zhuang Autonomous Region. According to Zou Ling, the production director of the new company, the location’s distinctive appeal emerged as a crucial factor for this investment.

Bolstered by a state-of-the-art integrated transportation system connecting railways and seas within the FTZ, the company gained the ability to export products seamlessly to Vietnam, Thailand, and the Association of Southeast Asian Nations (ASEAN) countries. This streamlined process eliminates the need to alter containers at the port, serving as a catalyst for the company’s overseas market expansion. The FTZ’s comprehensive support extends to taxation, investment, and talent resources, making it a haven for Albemarle’s growth ambitions.

Zou Ling remarked, “Within a day, it helped us settle the accommodation for employees, resolving the issue,” exemplifying the FTZ’s commitment to fostering a conducive business environment. In a remarkable achievement, the new company produced an impressive 2,022 metric tons of lithium hydroxide and achieved an industrial output of 1 billion yuan (approximately $140 million) during the final two months of 2022.

Driving Force in Foreign Trade

Since the inauguration of China’s first pilot FTZ in Shanghai back in 2013, the nation has continued to thrive on the global stage by establishing 21 additional FTZs, along with the transformative Hainan Free Trade Port. These developments have injected vigor into both the regional and global economies, serving as magnets for foreign investment and stabilizing foreign trade over the past decade.

The Ministry of Commerce reports that in 2022, the aggregate import and export volume of these 21 FTZs surged by an impressive 14.5 percent, amounting to 7.5 trillion yuan, constituting 17.8 percent of the nation’s total. Simultaneously, utilized foreign investment surpassed the 220 billion yuan benchmark, contributing 18.1 percent to the nationwide total. As a testament to their success, the first half of 2023 witnessed a robust surge in foreign investment within these FTZs.

Yang Tao, director general of the Comprehensive Department of the Ministry of Commerce, divulged that foreign investment in the FTZs for this period exceeded 129.66 billion yuan, marking a remarkable year-on-year rise of 8.2 percent. High-tech industries led the charge with a remarkable 21.2 percent year-on-year growth rate, underscoring the FTZs’ role as a haven for innovation and growth.

Efficient Cross-Border Logistics

In a showcase of China’s unwavering commitment to seamless international logistics, a China-Europe freight train recently embarked from Xiamen, part of the Fujian FTZ, carrying a substantial cargo of goods. This initiative has enabled rapid exports to Kazakhstan and Uzbekistan through the Khorgos Gateway, culminating in the remarkable achievement of over 100,000 twenty-foot equivalent units (TEUs) exported by this train.

The China-Europe (Xiamen) freight train, operational since August 2015, has completed a staggering 1,213 export trips, transporting goods valued at over $4.5 billion, encompassing electronics, machinery, biomedicine, and more. The establishment of three distinct freight routes linking China with Europe, Asia, and Russia has significantly expedited transportation, reducing travel time to neighboring countries such as Thailand, Vietnam, and Indonesia.

In southeast China’s Sichuan FTZ, Chengdu Shuangliu International Airport and the Chengdu International Railway Port have collaborated to open a total of 131 air routes and connect to 25 domestic cities and 69 overseas locations. Impressively, the China-Europe freight trains from Chengdu and Chongqing Municipality executed over 5,000 trips in 2022, amounting to a cumulative total exceeding 22,000 trips and accounting for 30 percent of all China-Europe freight train journeys in the country.

Diverse Development Goals

China’s FTZs span the nation’s eastern, central, and western regions, each with distinct strategic roles and development objectives. For example, the Guangdong FTZ prioritizes economic integration and transit with Hong Kong and Macao, while the Fujian FTZ focuses on fostering trade with Taiwan. With its geographic proximity to Myanmar, Laos, and Vietnam, the Yunnan FTZ is poised to serve as a conduit for cross-border trade and collaboration with ASEAN nations.

Taking their rich experience in foreign trade into account, FTZs in Hainan, Beijing, Shanghai, Tianjin, Guangdong, and Fujian provinces have been chosen for trials to align with high-standard international economic and trade rules. This includes agreements such as the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership and the Digital Economy Partnership Agreement.

As China continues to champion FTZs, they remain committed to their unique positioning and characteristics, fostering differentiated development and innovative practices. Shu Jueting, spokesperson for the Ministry of Commerce, affirmed this trajectory, underscoring China’s dedication to facilitating economic growth, fostering global connections, and reshaping the international trade landscape through its dynamic FTZs.

Frequently Asked Questions (FAQ): China’s Free Trade Zones

1. What are Free Trade Zones (FTZs) in China?

Free Trade Zones (FTZs) in China are designated geographic areas where special economic policies and regulations are implemented to attract foreign investment, promote trade, and drive economic growth. These zones offer incentives such as tax benefits, simplified customs procedures, and streamlined regulations to facilitate international business and trade.

2. How many FTZs does China have?

As of the latest information, China has established 21 Free Trade Zones (FTZs) across various regions of the country, along with the Hainan Free Trade Port. Each FTZ has its own unique strategic focus and development goals tailored to the region’s strengths and economic priorities.

3. What role do FTZs play in attracting foreign investment?

FTZs serve as magnets for foreign investment by offering a favorable business environment, reduced bureaucracy, and special incentives. These incentives include relaxed trade barriers, simplified customs procedures, and preferential tax policies that make investment in these zones attractive to both domestic and foreign businesses.

4. How do FTZs impact international trade?

FTZs significantly boost international trade by facilitating smoother import and export processes. They often feature integrated transportation systems that connect railways, ports, and other logistical infrastructure, making it easier for businesses to move goods in and out of the zone. This streamlined process expedites trade with neighboring countries and regions.

5. What benefits do FTZs provide for businesses?

FTZs offer a range of benefits for businesses, including reduced bureaucracy, easier access to international markets, enhanced logistics and transportation infrastructure, special tax incentives, and support in talent acquisition. These benefits create an environment conducive to business growth and expansion.