Xiamen bonded zone targets free trade area
By Zhang Jin (China Daily)
Updated: 2004-08-06 16:15

Xiamen Xiangyu Bonded Zone, one of China's smallest bonded areas in terms of size, is expected to gain an advantage by transforming itself into a zone-port interaction area, a transition towards its ultimate goal of a free trade zone.

The move takes place as the nation's 15 bonded areas are losing their lustre since China's opening up under the World Trade Organization (WTO) has gradually diminished their tariff advantages.

Hu Haipi, director of the zone's administrative committee, told China Daily: "Our ultimate goal is to transfer the zone into a leading free trade area in China."

The zone has already applied to establish the nation's second zone-port interaction area to follow Shanghai, which was selected as a pilot last year.

"The General Administration of Customs and other related ministries inspected our zone in June," he said. "Approval for establishing a zone-port area might be given soon by the central government."

He also said that it is very likely that the other applicants including Qingdao, Dalian, Zhangjiagang, Tianjin, Shenzhen and Ningbo may also win approval.

A zone-port interaction area is a combination between bonded land and a nearby international port. A bonded logistics zone will usually be set up in a port area.

The combination will benefit enterprises in the former bonded zone by offering better logistics services, helping solve the bottleneck affecting China's bonded zones, Hu said.

But what seems most attractive to firms should be an updated tax rebate mechanism, he added.

Rebates will be granted upon the entry of domestic goods into zone-port areas, rather than the current practice of providing refunds after those goods leave China.

And firms within the zone will be able to enjoy more relaxed foreign exchange controls, he said.

Xiamen Xingyu Bonded Zone plans to connect itself with Dongdu port, the largest in Xiamen, to form a 0.7 square-kilometre zone-port interaction area.

The ambitious director also plans to expand the area to 8.7 square kilometres in the future after it annexes Xiamen's Haicang port and Gaoqi International Airport.

Although Hu agrees that the attractions of bonded zones are diminishing due to the country's continuous tariff cuts following WTO entry in late 2001, he believes that these zones still have advantages.

"Low tariff does not mean zero tariff," he said. "There is still large profit potential for enterprises if they choose to locate themselves in bonded zones."

China's average import duties currently stand at 10.5 per cent.

China is now launching a reform to transform its old bonded zones to continue to attract foreign investment.

Bonded areas in Qingdao and Ningbo also have ambitious plans to turn themselves into free trade zones.

It is reported that the Chinese mainland will have two or three world-class free trade zones by 2015, if the transformation of the bonded zones is successful.

Experts also suggest that some of China's existing bonded zones could also be turned into export processing zones and economic and technical development zones.

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