3 Ways US Companies Continue to Benefit from China Manufacturing
Free trade zones (FTZs) are unique, special economic zones (SEZ). Within these zones, goods can be manufactured, exported, and imported without direct Customs intervention. FTZs are an important part of the modernization of China’s business practices. FTZs give China manufacturing authorities a chance to experiment with different pro-business regulations. The first fully operational FTZ was created in Shanghai in 2013.
Since opening the FTZ in Taiwan-focused Fujian in late 2014, China has opened nine more. There are other FTZs planned, including a global-scale Hainan port, South of Hong Kong, planned for 2025. These FTZs create new opportunities for businesses worldwide.
Benefit #1- There’s a Steadily Growing List of FTZs to Choose From
Meant to test the waters as comprehensively as possible, the Shanghai FTZ was designed with flexibility in mind. Aside from a shrinking group of industries found on the current version of the official “Negative List,” businesses of all kinds are welcome. The “Negative List” is a list of industries that are prohibited or restricted by Chinese authorities. Some prohibited industries relate to national security and foreign investment is not allowed. Foreign investment is allowed in restricted industries but special approval or a joint venture with a Chinese partner is required.
Since the creation of the Shanghai FTZ, China has sought to imbue each of the subsequent FTZs with more of a particular purpose. Similar to the FTZ in Fujian, the Guangdong FTZ aims at facilitating regional trade, in the latter case with Hong Kong and Macao.
The FTZ in Tianjin opened in 2015. It centers on technologically advanced China manufacturing and offshore financial services. Pilot FTZ programs opened in 2017 in Chongqing, Liaoning, Henan, Hubei, Shaanxi, Sichuan, and Zhejiang, each with its own distinctive mission.
Benefit #2- There are Benefits for the Right Type of Business in Each FTZ
The menu of China manufacturing benefits vary from one FTZ to the next but some of the most common and significant include:
- Streamlined customs clearance- Many of China’s existing FTZs provide access to simplified, volume-oriented customs processes that promote efficiency and agility. Firms in certain FTZs can submit aggregate import and export declarations and combine several shipments on individual customs forms. Goods can also be sent directly to warehouses by qualified receivers, with border clearance following on a monthly or quarterly basis.
- Duty-free transshipping and qualifying imports- Materials and products bound for the US and other countries can be received in designated FTZs and sent onward without the imposition of duties. US businesses investing in equipment and machinery for their own use may typically import these without paying duties.
- Easier incorporation- Capital, oversight, and registration requirements are typically lower for those wishing to establish FTZ-based businesses.
- Financial freedom- Prevailing restrictions regarding foreign exchange and the conversion of Yuan are mostly loosened or lifted inside FTZs.
- Lower taxes- An FTZ-standard tax rate of 16.5 percent for foreign firms applies in many cases. Tax incentives and rebates are common.
Firms that manufacture in FTZs may also take advantage of opportunities such as simplified dispute resolution processes and industry-specific support. Choosing the right FTZ can add significantly to the inherent advantages of China manufacturing.
Benefit #3- ITI Manufacturing is Ready to Help
FTZs offer many unique benefits but are not right for every company. How do you know if and FTZ is right for your company? Call the experts at ITI Manufacturing. For almost 45 years, ITI Manufacturing has been helping companies worldwide make the most of and choose wisely of the full range of China manufacturing opportunities. With a growing list of FTZs adding even more value, ITI is ready to put its expertise and strong, longstanding relationships with China’s leading manufacturers at the service of clients.
Whether your company is new to China manufacturing, or you’ve experienced more long-term challenges than success, ITI is here to help. Give us a call toll-free at 281-242-7030.