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Industrial Zones in China:
Overview & Incentives
April 20, 2006 • Chicago
Andrew M. Pan
North American Representative Office of Shenzhen, China (NAROS)
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General Picture
• Special Economic Zone (SEZ)
• Economic & Technological Development Zone (ETDZ)
• Free Trade Zone (FTZ)
• High-Tech Park
• Export Processing Zone (EPZ)
• Bonded Logistics Zone (BLZ)
• http://www.cadz.org.cn for more information
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Special Economic Zone (SEZ)
• Initiative by Mr. Deng Xiaoping in 1979
• The first window of China open to the outside world
• Experimental arena for China’s economic reform and open-door policy
• 5+1: Shenzhen, Zhuhai, Shantou, Xiamen, Hainan Island, and Shanghai Pudong, all in the coastal area
• Special policies and incentives (duty free, tax break etc.) granted at early stage, not many at present
• 15% corporate income tax rate for all enterprises, compared to the rate of 33% in most parts of China
• Shanghai Pudong and Shenzhen emerged as China’s international cities
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Economic & Technological
Development Zone (ETDZ)
• 54 in total, national certified, located in major industrial and
commercial cities across the country
• Pioneering zones in the region with good infrastructure to
observe foreign investment
• Focus on manufacturing of labor-intensive consumer
products
• Foreign investors aiming at China market entry or lowering
cost for export
• Many other local ETDZs, not national certified, less
regulated, not recommended
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Economic & Technological
Development Zone (Cont’d)
• Incentives:
– 15% corporate income tax rate for manufacturing FIEs
– 2 years free and 3 more years half reduction (7.5%) of corporateincome tax rate for manufacturing FIEs with operation term of 10+ years
– Another 3 more years 7.5% corporate income tax rate for manufacturing FIEs qualified as advanced technological company
– Life long 10% corporate income tax rate for manufacturing FIEs which export over 70% of their products
– Duty free for imported manufacturing equipments and components*
– Up to 100% refund of corporate income tax for re-investment in China
– After tax profits free to move out of China
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China-Singapore Suzhou Industrial Park
– A ETDZ jointly set up
and managed by China
and Singapore
governments
– Located in greater
Shanghai area
– One of China’s current
most popular foreign
investment
destinations
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Major Industries
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Tianjin Economic & Technological
Development Area (TEDA)
– Located in Beijing-Tianjin area of Northern China
– Where Motorola has its world largest manufacturing operation
with 10,000+ employees
– China’s next “hot
point” for foreign
investment
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Free Trade Zone (FTZ)
• Enclosed, bonded zones
• 15 in total, all along coastal area in cities with port facilities
• Function: transit trading, distribution, logistics service, and manufacturing
• Besides the same policies and incentives as ETDZs, FTZ also enjoys:– Import license free
– Duty free/bonded for all imported goods (manufacturing and office equipments, components etc.)
– No VAT in the zone
– Simplified customs clearance procedures
– No customs fee for storage and transit goods
– Less foreign exchange control
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Shanghai Waigaoqiao Free Trade Zone
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Shenzhen Free Trade Zone
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High-Tech Park
• 53 in total, focus on new and advanced technologies
• Function: technology products manufacturing, R&D, start-up, and education
• Park in park: Incubator Campus, Software Park, IC Design Park, Overseas Returnees Park etc.
• Home for the China high-tech big companies like Huawei, Lenovo, SMIC, ZTE etc.
• Pool of international and local venture capitals
• Besides the same policies and incentives as ETDZs, High-Tech Park also enjoys:
– Local governments subsidized land price and property rental
– Central and local government funding support
– VAT subsidies
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Shenzhen High-Tech Industrial Park
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Shanghai Zhangjiang High-Tech Park
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Export Processing Zone (EPZ)
• 56 in total, most located in ETDZs
• Enclosed, bonded zones
• Function: manufacturing for export only
• Besides the same policies and incentives as ETDZs, EPZ also enjoys:– Import license free
– Duty free/bonded for all imported goods (manufacturing and office equipments, components etc.)
– No VAT in the zone
– Goods (including public utilities) export to EPZ from China qualified for VAT rebate
– Simplified customs clearance procedures, 24/7 schedule
– Less foreign exchange control
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Bonded Logistics Zone (BLZ)
• BLZ: Shanghai, Shenzhen, Dalian, Tianjin, Qingdao, Zhangjiagang, Ningbo, and Xiamen. All connect to ports, so called “Zone-Port Connection”
• Bonded Logistics Center (Type B): Suzhou
• Function: bonded warehousing, international distribution/delivery, simple processing & value-added service, transit trading, and virtual port
• Incentive:– Goods from overseas are bonded, no customs duty or VAT
required
– Goods from China are regarded as exports and enjoy VAT rebate when entering BLZ
– Goods in BLZ are allowed to consolidate, transfer and store without time limit
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Objective
– VMI based just-in-time
distribution
– Lowering logistics cost by
taking advantage of VAT
rebate for export policy
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Conclusion/Suggestion
• Choose industrial zone -- always put industrial zones on
the top of site selection list
• Pick the right one -- different zone caters to different
business model and/or industry
• Get the best deal – besides central government preferential
policies and incentives, local government likely to offer
more incentives
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Thank You!
Please contact NAROS for more information.
Tel: 213-628-9888 Fax: 213-628-8383
E-mail: [email protected]
Web: www.shenzhenoffice.org