China -Waigaoqiao

General Description

The Waigaoqiao Free Trade Zone (WFTZ) is located in Shanghai, China. The WFTZ was established with the approval of the State Council in June 1990 and is located on 10 square kilometres of designated area. Currently, it is the oldest and largest of China's free trade zones ¹⁰⁷ .

Infrastructure

Energy

The Waigaoqiao power station is located in the eastern part of the WFTZ and provides 5,400,000 kilowatts of power. In addition, five 35,000 kv. transformer substations supply around 200,000 kv. of electricity. Waigaoqiao plans to construct 134 additional 35,000 kv. transformer substations and one 220,000 kv. transformer substation to cater to the growing energy requirements in the zone ¹⁰⁸.

Telecommunications

The WFTZ has a well developed telecommunication infrastructure, with ray cables, ESDN lines and ADSL lines. The companies based in the WFTZ have access to various IT services, including high speed and broad band internet connectivity.

Transportation

Road Transport
The WFTZ has access to an established road transport. Yanggao Road, a 50 meter wide and 24.5 kilometre long highway, connects the WFTZ with Puxi through Yangpu and Nanpu suspension bridges. The south north inner beltway in the downtown area, Yan'an Dong Channel tunnel and Yan'an inner beltway speed up traffic from the city centre to the WFTZ. The Outer Circle that runs across Huangpu River at Zhang Huabang area through the east side of WFTZ reaches Wu Song Harbor area ¹⁰⁹.

Sea Transport
The WFTZ has access to an established sea transport. Waigaoqiao Port is one of the most important logistical hubs of the Yangtze Delta Economy and the most important area for Shanghai's International Shipping Industry ¹¹⁰.

Rail Transport
The WFTZ is serviced by a light rail system.

Air Transport
The WFTZ is served by Hongqiao International Airport and Pudong International Airport.¹¹¹

Financial Sector

The WFTZ has access to a well established financial network. There are more than 3,000 financial institutions located in Shanghai, including more than 50 foreign bank branches.¹¹²

Business Sectors

There are many companies operating in the WFTZ belonging to industries like clothing, electronics and telecommunications. However, the principal industry operating in the WFTZ is semiconductors. Main activities performed in the WFTZ relate to trading, manufacturing and processing, warehousing and distributions, and bonded logistics and transportation.¹¹³

Incentives

The WFTZ provides the following incentives ¹¹⁴:

• Customs duty and VAT exemption - Companies operating in the WFTZ are exempted from payment of customs duties and VAT on the importation of raw materials, machinery, manufacturing components, and office equipments. This exemption does not apply to raw materials and components imported for use in products to be sold domestically. Imported goods can be stored within the WFTZ, and simple processing is permitted.
• Foreign exchange incentives The WFTZ is the only place in China where foreign exchange values may be fully retained.
• FDI incentives - Foreign-funded companies operating in WFTZ are entitled to conduct international trading, manufacturing, processing, warehousing, logistics and exhibition of bonded commodities. Foreign funded companies are also entitled to conduct trade related services, like testing and maintenance.
• Government subsidy Foreign companies investing in the WFTZ zone may enjoy the government preferential tax treatment and special subsidies from the Shanghai Municipality and the Pudding New Area government, subject to conditions.

Business Inputs

Raw Materials

Due to an established transportation network, the WFTZ has access to main raw materials. However, Deloitte could not obtain reliable public information regarding raw materials available to companies operating within the WFTZ.

Labour

The WFTZ has access to a significant pool of human resources comprising of approximately 16 million people.¹¹⁵

Shanghai Jiao Tong University ensures a steady influx of skilled labour in the local economy. Shanghai Jiao Tong University is one of the oldest and most influential universities in China that is run by the Ministry and Shanghai Municipality.¹¹⁶

Investors

The WFTZ attracted more than 8,000 projects, including 6,000 foreign investments from 82 countries, by the end of 2004. The total investment in Waigaoqiao amounts to USD 10 billion.¹¹⁷

---