A Free Trade Zone (FTZ) refers to an area within which goods can be imported, processed and re-exported without the intervention of customs authorities.
As of its first birthday, the Shanghai FTZ had seen 12,000 registered enterprises and $121.7 billion in foreign trade.
Functions of the FTZ involve interest rate liberalization, currency free exchange, a liberalized finance industry, financial service innovations and other offshore financial services.
The negative list is an innovative management approach introduced in the Shanghai FTZ. It regulates what not to do, rather than what to do for foreign investments in this zone.
The negative list categorizes 18 main sectors of the national economy, such as manufacturing, transportation, IT and finance, and further subdivides them into 1,067 subcategories.
The negative list has had 110 restrictive clauses and 29 prohibitive ones as ofDec, 2014.
The Shanghai FTZ first covered an area of 28.78 square kilometers and consists of four bonded zones, including Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
After more than one year's operation, the State Council decided to expand its coverage to 120.72 square meters, bringing in Jinqiao Export Processing Zone, the Zhangjiang High-Tech Park and the financial center Lujiazui, all of which are currently located in Shanghai's Pudong New Area.
FTZ expansion
With its success, Chinese president Xi Jinping said the experience gained at the China (Shanghai) Pilot Free Trade Zone can be replicated in more places "as soon as possible".
Three more FTZs in Guangdong, Tianjin and Fujian were approved and are expected to be officially launched this year.
The Guangdong FTZ, with a total area of 116.2 square km, includes zones in the cities of Guangzhou, Shenzhen and Zhuhai, specifically to attract investment from Hong Kong and Macao.
The Fujian FTZ, with a total area of 118.04 square km, will include industrial areas in the provincial capital of Fuzhou, the city of Xiamen, and Pingtan, a new industrial park targeting Taiwan investment.
The Tianjin FTZ, with a total area of 119.9 square km, will consist of three sections around the Tianjin Port, Tianjin Airport and the Binhai New Area industrial park.
