FTZ will encourage diversity and upgrading

Officials say the establishment of the Shanghai Pilot Free Trade Zone will firmly upgrade the nation's shipping and port industries amid the slow global economic recovery.

Wang Xinkui, director of the counselor's office of Shanghai municipal government, said transit trade has great potential in raising China's shipping activities in the zone because it will not only stimulate the export of manufacturing goods in China's Yangtze River Delta region but will also offer long-term growth opportunities to various ports in the country's Zhejiang and Jiangsu provinces.

With a total area of 28.78 square kilometers, the zone manages four areas with the application of favorable customs supervision. It comprises Yangshan bonded port, Shanghai Waigaoqiao bonded zone, Waigaoqiao bonded logistics park and Shanghai Pudong Airport Free Trade Zone.

Goods can be imported, processed and re-exported without the intervention of customs inside the zone, which means it permits the free and fast flow of commodities.

"The FTZ is a proactive move to follow the new trend of global trade and economic development," Wang said. "For both Chinese and foreign companies, it is also an ideal way to ship industrial intermediary products or materials from a foreign source for use in factories in other overseas markets via Shanghai."

The world's major free trade centers such as Dubai, New York, Hamburg and Amsterdam are all defining themselves as international shipping hubs or global logistics centers because this practice is an effective way to drive regional growth in the trade, finance and service sectors.

To shipping companies and ports, an abundant supply of goods is the foundation of opening new shipping routes, building oil wharves and improving port facilities. Flexible financial reforms, including preferential tariff policies, lifting restrictions on interest rates and foreign exchange quotas could attract more container and bulk ships come to Shanghai.

As the world's largest container port by volume, the total trade value of Shanghai Port hit $434 billion in 2012, exceeding most ports in the world, according to Shanghai International Port (Group).

He Liming, chairman of the Beijing-based China Federation of Logistics and Purchasing, said another breakthrough is that the zone has loosened foreign investment rules for setting up shipping companies in the Chinese market.

If foreign companies wanted to invest in the international shipping business in China, they had to do it through a restricted joint venture. The proportion of their holding share was set at 49 percent maximum. Foreign ships were also not allowed to carry out domestic shipping business, according to China's foreign investment regulation on international shipping business issued in 2004.

"The new FTZ policies include relaxing limitations on foreign ownership in joint ventures, allowing Chinese companies to be partly or fully owned by foreign buyers, as well as using ships without Chinese flags to operate coastal trading and enabling the establishment of foreign ship management companies," He said.

"This transformation will be a push to improve China's service standards of related businesses such as maritime arbitration, shipping insurance, trade services and financial operations."