China's 21 Free Trade Zones
The Free Trade Zones (FTZ) are at the heart of the Chinese government's strategies and have been introduced over the years with specific objectives: developing regional trade, increasing foreign direct investment, opening the market to new economic sectors.
The first Free Trade Zones were created in Shanghai, then in Guangdong, Tianjin and Fujian, to have 21 different special zones in the various areas of the country: Shanghai (2013), Guangdong (2015), Tianjin (2015), Fujian (2015), Chongqing (2016), Sichuan (2016), Shaanxi (2016), Henan (2016), Zhejiang (2016), Hubei (2016), Liaoning (2016), Hainan (2018), Jiangsu (2019), Shandong (2019), Hebei (2019), Heilongjiang (2019), Guangxi (2019), Yunnan (2019), Beijing (2020), Anhui (2020), Hunan (2020).
Free zones are areas where goods can be imported duty-free and VAT-free, with tax breaks on the income of companies and individuals, through refunds, subsidies or reduced rates. Faster procedures for currency conversion, customs clearance of goods, and company registration are also tested in FTZs.
Among the 21 special zones, the province of Hainan has been promoted from 1 June 2020 as a Free Trade Port to liberalize and facilitate trade, investment, financial transactions and become a model free trade zone.
Companies registered on the island and active in sectors incentivized by the government can benefit from an income tax rate of 15%, lower than the ordinary rate of 25%; in addition, by 2025 the entire island will be duty-free, as is the case for the Hong Kong Special Administrative Region.
For economic activities that will guarantee an added value produced locally of at least 30% in the processing of goods, zero duties will also be guaranteed on imports from Hainan to mainland China.
Taxation for highly-skilled talented foreign managers and professionals is 15%, guaranteeing the most advantageous individual tax regime in mainland China.
Hainan is adjacent to Guangdong which is the province with the highest population and GDP in China and in 2020 the island province recorded a growth of 3.5%, higher than the national performance.