Aerial view of factory buildings in Lingang area, Shanghai, in June (Photo: IC)
The China (Shanghai) Pilot Free Trade Zone (FTZ) on Tuesday added a new area that occupies 119.5 square kilometers of Lingang in the southeastern part of the city. Chinese analysts said the addition, which nearly doubled the size of the Shanghai FTZ, will bring vigor and confidence to the region.
The Lingang Special Area occupies a pivotal geographic position, which enjoys the advantage of being easily accessed by air, sea and rail through its proximity to Shanghai Pudong International Airport, the Yangshan Port and a planned high-speed railway. Yangshan Port is the world's top container port.
The area's inauguration was on Tuesday, but the approval by the State Council, China's cabinet, was made public earlier in August. According to the State Council, Lingang is expected to become a globally competitive, influential free trade area with special functions by 2035.
Liu Shengjun, director with the National Affairs Financial Reform Institute and FTZ expert, said that the term "special functions" hinted that the area will develop offshore trade.
In the case of Shanghai, offshore trade is handled by companies in the city, although the goods concerned originated outside China and are being dispatched to overseas buyers via direct shipment or transshipment without entering China.
"This would bring breakthroughs in trade, investment and finance," Liu said. "This would bring new economic output for China."
The expansion of the Shanghai FTZ came just two days after the central government announced plans to develop Shenzhen, South China's Guangdong Province into a pilot demonstration area with Chinese characteristics. Analysts said that the two announcements will boost business confidence in China, although executives are waiting for more concrete measures due to be released in the coming weeks.
The area is 75 kilometers from downtown Shanghai.
The Shanghai Municipality hopes to attract advanced industry, including integrated circuits, biopharmaceuticals, artificial intelligence (AI), aeronautics and aerospace, to form industrial clusters in the area. Nearby transportation hubs are expected to support the trade and industrial development of the new area.
Analysts said the focus will be on China's manufacturing weak links in its industrial chain in the fields of chips, drugs, smart technology, aircraft engines, new-energy vehicles and data centers. Chips and AI are of special importance, they said.
Media reports revealed that companies registered in the area include NASDAQ-listed ACM Research Inc and solar energy giant Hanergy.
According to media reports, the new area will have a gross output of more than 1 trillion yuan ($141.6 billion) by 2035.
This is the second time that the Shanghai FTZ has expanded its domain, and the latest expansion has almost doubled its size.
Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday that the new area will inject the Shanghai FTZ with vigor, with its new goals requiring more improvement in governance.
US electric carmaker Tesla's first overseas plant is also located in the Lingang area. The new-energy car plant wholly owned by Tesla is set to begin production within the year.
Analysts said that the development of the Lingang area could include an experiment in cross-border capital management to better compete for global trade resources and the development of a free trade port, although the plan used the terminology, "internationally acclaimed, most competitive free trade industrial park."
Globally, "free trade ports" refer to Singapore, Dubai and China's Hong Kong.
Leading manufacturing companies such as SAIC Motor, Shanghai Electric Group Co, Siemens and GE have already established a presence in the area.