China has been steadily opening up its economy ever since the Den Xiao Ping era. The latest development comes in the form of its investments to expand the strategically important Shanghai Free Trade Zone (FTZ).
The move proves to the world China’s strong commitment to an all-round opening up of its economy. This comes in an international environment where the US is increasingly backing out from its leadership role in the global economy and trade while China assumes an increasingly important role in it.
Along with the expansion plans, the Chinese leaders announced their commitment to lead the progress in economic globalization. A new Lingang section that has been added to the FTZ area will be developed into a highly competitive FTZ that will meet all the global standards according to the blueprint provided by the state council.
According to the provided master plan, the Lingang will cover an area of 119.5 square feet, which will help bring in foreign investments and drive capital flows along with making the free flow of goods possible.
The new area should not be seen as a mere extension of the existing FTZ and the policies in place there. The latest development is a revamp of the physical infrastructure as well as an institutional and policy reform. The government aims to turn it into a globally competitive and influential special economic zone as well. This means that it goes beyond mere facilitative measures and invites real investment and trade liberalization. This will serve as a huge gesture from China in support of economic and trade liberalization.
It aims to have a moderately developed and institutionalized system of trade facilitation and liberalization by 2025. By 2035, the Chinese government hopes to turn it into a fully-fledged special economic function zone which is globally competitive. It is largely being considered as a major anchor by the Chinese economy into an open industrial system.
The idea is to build it into a cluster of international businesses, providing financial services, engaging in technological research and development, which will go on to boost the industrial upgrading of the existing businesses. Firms engaged in specific fields such as R&D into AI, aviation, biomedicine, etc. will be offered lucrative tax cuts for the initial five years. They will be taxed at lower rates of 15% during that period.
The investment into the expansion of the Shanghai FTZ is a positive step forward for the Chinese economy as well as extremely beneficial for local as well as foreign businesses.
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