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Expansion of Shanghai FTZ seen as market boost

Updated: Aug 12,2019 10:29 AM    chinadaily.com.cn

Ever since the announcement last week by the State Council, China's Cabinet, that the China (Shanghai) Pilot Free Trade Zone would be expanded to include Lingang New Area, Song Changjun has been bombarded with phone calls and messages from local real estate agencies touting apartments and even villas for sale in the area.

The 34-year-old Song, manager of an information technology company that was registered in Lingang six years ago, wasn't much interested in property. Nonetheless, the calls and messages convinced him he should investigate further.

Three days after the expansion plan was announced, Song stopped by the administrative service center — despite the municipal government's warning earlier that day that people should stay indoors to avoid Typhoon Lekima, which was about to hit the city.

The purpose of Song's brief visit was simple: He wanted to check out opportunities presented by the FTZ expansion plan.

"I was here for some company affairs in May. In less than three months, the center has been renovated, with a counseling counter for investment set at the entrance," he said. "I read through the inclusion plan several times after it was announced, as it emphasizes the real economy, especially the modern manufacturing industry."

Under the plan to add the Lingang New Area to the Shanghai FTZ, companies specializing in key industries such as integrated circuits, artificial intelligence, biomedicine and civil aviation will be assessed a 15 percent business income tax for five years — a sharp cut from the usual 25 percent.

More important, by being included in the FTZ at this stage, the 119.5-square-kilometer Lingang New Area is expected to grow into a special economic zone with strong global market influence and competitiveness by 2035.

Sun Yuanxin, a professor of management and an FTZ researcher at Shanghai University of Finance and Economics, said Lingang will not only take the upper hand in the four key industries mentioned in the plan but also in the development of smart manufacturing, new electric vehicles and big data.

"Defining the newly included area as a special economic zone will encourage more companies in emerging industries to settle down in Lingang and help Shanghai to achieve more strategically important results, which is in line with the country's development trajectory," he said.

Lingang, which is in the far southeastern area of eastern Shanghai's Pudong district, has provided many manufacturing industry success stories since the municipal government started building an industrial cluster in 2003. Artificial intelligence giants such as Cambricon and SenseTime have set up operations in Lingang.

The Lingang administrative committee rolled out a plan in May last year to create a demonstration zone that will allow testing for driverless cars, boats and even planes. Tesla's gigafactory in Shanghai, which has attracted more than 50 billion yuan ($7.3 billion) of investment, is also in Lingang New Area.

Lingang's capabilities in high-end manufacturing is crucial at a time when China's economic development faces mounting uncertainties worldwide, said Yin Chen, secretary-general of the FTZ research institute at Fudan University.

"It is of utmost importance now to enhance the country's industrial competitiveness and move up to the top of the value chain. To that end, improved capabilities in science and technology innovation are a must for cities and for the country generally," he said.

Given the wider opening-up expected to follow the inclusion of Lingang New Area, Shanghai will be more able to attract high-end talent and other resources worldwide. It will boost Shanghai's competitiveness and global cooperation, Yin said.

The inclusion of Lingang is the second expansion of the Shanghai FTZ, which was the first of its kind in China when it launched in September 2013. The first expansion occurred in late 2014, when the 28-sq-km area was extended to 120 sq km.

The latest expansion reflects the Shanghai FTZ's huge success over the past few years, said Zhao Xiaolei, director of the FTZ research institute at Shanghai University of Finance and Economics. The expansion also comes at a right time, because Shanghai is calling for a new round of strategic development, Zhao said.

"While supervision and systematic innovation has been stressed over the past few years, we can see that the newly included area for the Shanghai FTZ will focus more on freedom of investment, trade, capital, transportation and employment, which represents another step forward.

"This reflects the mission of Lingang, which is to usher in a higher level of opening-up."

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