Pi­lot FTZ en­hances China mar­ket ac­cess

In the Septem­ber/Oc­to­ber is­sue of Ex­porter we shared some in­sight into China’s Pi­lot Free Trade Zone. Now Shang­hai-based contributor Damon Pal­ing ex­plains the out­comes for Kiwi ex­porters.

Exporter - - MARKET INTELLIGENCE -

It was Septem­ber 2013 when the new China (Shang­hai) Pi­lot Free Trade Zone (SPFTZ) was of­fi­cially opened. As was ex­pected, rather than be­ing a ‘big bang’ event a se­ries of re­form mea­sures were re­leased over sev­eral months. Th­ese mea­sures can en­hance China mar­ket ac­cess op­por­tu­ni­ties for cer­tain New Zealand com­pa­nies.

The pur­pose of the SPFTZ is to ex­pand the ser­vices sec­tor and pro­mote re­form of the for­eign in­vest­ment man­age­ment sys­tem. This in­cludes re­gional head­quar­ter ac­tiv­i­ties and new trade fa­cil­i­ta­tion re­forms at the Cus­toms bor­der. Cap­i­tal ac­count con­vert­ibil­ity and the full open­ing up of the fi­nan­cial ser­vices sec­tor – not­with­stand­ing the Neg­a­tive List – should take place.

From a Gov­ern­ment per­spec­tive risks will be con­trolled and a stepby-step prin­ci­ple adopted for rolling out th­ese mea­sures.

The SPFTZ in­cludes the four ex­ist­ing zones of: Shang­hai Waigao­qiao Bonded Zone, the Shang­hai Waigao­qiao Bonded Lo­gis­tics Park, the Yang­shan Bonded Port and the Shang­hai Pudong Air­port Com­pre­hen­sive Bonded Zone. Th­ese four ar­eas cover about 28 square kilo­me­tres and are lo­cated ad­ja­cent to Shang­hai’s ma­jor in­ter­na­tional air and sea ports.

Since Septem­ber 2013 sev­eral thou­sand new com­pa­nies – do­mes­tic and for­eign – have regis­tered within the SPFTZ. Th­ese new com­pa­nies are trad­ing in goods and ser­vices such as fi­nan­cial ser­vices and lo­gis­tics. Some of the no­table for­eign com­pa­nies to reg­is­ter in­clude Mi­crosoft (for Xbox One) and Ama­zon (for cross-bor­der e-com­merce).

New Zealand com­pa­nies es­tab­lish­ing a new Wholly For­eign Owned En­ter­prise (WOFE) may con­sider reg­is­ter­ing in the SPFTZ in or­der to ben­e­fit from cer­tain pref­er­en­tial fi­nan­cial sub­si­dies and cross-bor­der e-com­merce. A cen­tral business dis­trict of­fice lo­ca­tion may still be used to house em­ploy­ees and to be close to lo­cal ven­dors and cus­tomers.

The mar­ket price per square me­tre per day for leas­ing ware­hous­ing space within the SPFTZ in­creased in the lead up to, and shortly after, open­ing. Fast­for­ward to Oc­to­ber 2014 and prices are gen­er­ally sta­ble. From a re­gional view­point they re­main at about onethird of that pre­vail­ing in Hong Kong, which for some com­pa­nies rep­re­sents a sig­nif­i­cant cost sav­ing.

Over the past 14 months the fre­quency of cargo ves­sel/air­craft ar­rival/ de­par­tures con­tin­ued to in­crease, which is an im­por­tant con­sid­er­a­tion when com­pet­ing for limited freight space and

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