Shenzhen takes lead in bonded zone reform
By Wang Zhuoqiong (China Daily)
Updated: 2004-07-06 08:49

Shenzhen Yantian Bonded Zone is applying to establish the second Zone-Port Interaction area in the Chinese mainland, the initial step towards a free port.

Wang Yongzhen, General Secretary of Shenzhen Yantian Port Free Trade Zone Investment & Development Co Ltd (YPFID), told China Daily that "Shenzhen is the most likely city to be the Zone-Port Interaction Area among other applicants including six other bonded areas in Qingdao, Dalian, Zhangjiagang, Tianjin, Xiamen and Ningbo."

"It is just a matter of time." said Wang. "We are qualified and privileged to become the second Port-Zone Interaction Area in the mainland in terms of our location in proximity to Yantian port, easy access to railway and airport, and having the second largest container volumes in the mainland."

Zone-Port Interaction Policy is to set up a bonded logistics zone in the port area, connecting bonded zones with international ports. It includes offering logistics service in international warehousing and distribution, procurement, trade and combining bonded zone policy with international port service.

According to the policy, the final shape of the Yantian Port-Zone Interaction area will eventually occupy an even larger area than that covering the present bonded zone and port.

The setting up of the Port-Zone Interaction area outpaced original bonded zone policy in export tax refunds, logistics area and favorable foreign currency control policy, along with a policy of favorable land price.

Wang Guowen, the director with Research Center for Logistics Management of China Development Institute, a local government think tank, says that "Zone-Port Interaction policy extended the bonded zone to the international terminal by setting up a logistics zone in between, making a breakthrough from the original bonded zone policy towards a real free trade zone and free port and are of benefit to all parties concerned."

With land area of 1.03 square kilometers, the first Shanghai Waigaoqiao bonded test zone was initiated in February 2003 and came into full operation in early 2004.

The test zone is designed to reverse the declining status of the majority of bonded zones in the mainland, which have gradually lost their previous glory in regards to tariff advantages with China's accession to the WTO in recent years.

To date, 15 bonded zones with a total area of 51.05 square kilometres including Tianjin, Dalian, Xiamen have been built up in the mainland after the setting up of the first Shanghai Waigaoqiao Bonded Zone.

Wang attributed the current problems of bonded zones in China to bureaucracy, redundant working process and low efficiency in the customs service, which have kept them from developing further.

He said that as "in China, all bonded zones are named as 'free trade zones,' there remains a big difference in customs regulations with the international practice in real free trade zones or free ports."

To actually build up free trade zones and free ports would give incentive for further rapid expansion of bonded zone industry and container throughput volume in China.

According to the 21st Century Business Herald newspaper, sources from the central government said that the Chinese mainland would have two to three world-class free trade zones by 2015, if transformation of present bonded zones is performed successfully.

Wang also said that the key element in Shenzhen becoming a free trade zone depended upon institutional breakthroughs in trade, foreign currency administration, finance law and regulations.

"If Shenzhen can make further reform and policy arrangements, it could set up the first example of a real term free trade zone in the mainland. Also, it will be a golden chance for Shenzhen, China's first and largest special economic zone, to take the lead in reform once again in China," Wang said.

Also, Wang denied allegations about possible threats to Shenzhen's neighbouring Hong Kong, if the Yantian Bonded Area was upgraded to a free trade zone, saying "as a experimental project, the zone is too small to rival Hong Kong."

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