Shanghai gets go-ahead for free trade zone

World-class logistics services to benefit business supply chains

The State Council approved Shanghai's free trade zone project on Wednesday, which will catapult the city to the forefront of global logistics centers.

The project, occupying 28 square kilometers, will center around the Yangshan Deep Water Port and will take more than 10 years to build.

When completed, the free trade zone will provide world-class transport and communications facilities and a tax-free environment for domestic and foreign enterprises as a major hub of their supply chains in Asia.

The project was approved at a State Council meeting presided over by Premier Li Keqiang.

Under the central government's guidance, the Shanghai municipal government will explore innovative methods of trade and investment management, facilitate trade and investment, and further open up the service industry.

The central government also hopes the project can help advance reform and improve the standard of opening-up.

The project, mapped out at the start of this year, is the first of its kind in China and is also one of Shanghai's major tasks for 2013.

"The details of the free trade zone haven't been released yet. We will follow up with the guidelines from the central and municipal governments to build up a free trading platform," said Jian Danian, deputy director of the Shanghai Free Trade Zones Administration.

Jian said the focus is on offering more convenience and efficiency for local trading companies with improved policies on foreign investment, international trading settlement and cross-border transactions.

Han Jun, the Party secretary of COSCO Logistics (Shanghai) Heavy Haulage Co, said, "Shanghai is totally qualified as a free trade zone after attracting so many global companies to set up their regional and China head offices in the city. But the policies and operating system still need to be improved."

Han said the logistics industry in Shanghai is relatively disorganized, as it is not regulated under certain management rules and sector standards, which urgently need to be improved to meet demand from multinational companies.

Huo Jianguo, head of the Chinese Academy of International Trade and Economic Cooperation, said the free trade zone trial is a breakthrough in further promoting China's opening-up policy.

Zhou Shijian, a senior trade expert from Tsinghua University, said the zone will promote foreign direct investment in the Yangtze River Delta region.

He said the zone is located in the right area, as Shanghai is the nation's financial, economic and technological hub, and also home to a large number of multinationals.

Li Yiming, chairman of Shanghai Zhengzhang Import and Export Co, said, "We're looking forward to having more direct cooperation and more convenient trading procedures with overseas business partners to design and manufacture high-end products."

The company has its design and sales departments in Shanghai and production lines in inland provinces.

Li said the zone will definitely help small and medium-sized enterprises struggling in the trading industry.

Trade experts said such a project is of particular significance to China's industrial restructuring, which calls for the modernization of supply chain management with the emphasis on logistics.

Shen Guilong, a professor of economics at Shanghai Academy of Social Sciences, said the zone will be a breakthrough for Shanghai to achieve a new round of rapid economic development.

Shen said the zone will attract more global companies, especially from the service sector, to launch their Asia-Pacific operational offices or China headquarters in the city.

The zone is expected to initiate a series of measures to offer more complete, convenient and transparent foreign trade services, including customs clearance and supervision policies, said Shen.

It will include the Waigaoqiao Free Trade Zone, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.

Billy Mak, Hong Kong Baptist University associate professor of finance and decision sciences, said the zone might challenge Hong Kong's status as an offshore yuan financial hub.

"If the Shanghai free trade zone creates more business in yuan trade financing, this would definitively deal a blow to Hong Kong's offshore yuan business," Mak said.

Oswald Chan in Hong Kong and Ding Qingfen in Beijing contributed to this story.