Strategic positioning and objectives of Guangdong Free Trade Zone

The GFTZ was conceived to align with China’s broader initiatives, such as the Belt and Road and the GBA development plan. Its strategic location facilitates closer economic ties between mainland China and the Special Administrative Regions of Hong Kong and Macau. Each sub-zone has been designated specific roles:​

• Nansha: Focuses on advanced manufacturing, shipping logistics and financial services.​
• Qianhai and Shekou: Specialises in finance, modern logistics and technological innovation.​
• Hengqin: Targets tourism, leisure, healthcare, and cultural industries, leveraging its proximity to Macau.​

Policy innovations and incentives

The GFTZ has implemented a series of policy measures to foster a conducive business environment:​

• Trade and investment liberalisation: Adoption of a negative list approach allows foreign investors to operate in sectors not explicitly restricted. Simplified business registration processes and “one-stop” services have been introduced to expedite company setup.​
• Tax incentives: Eligible high-tech and modern service enterprises benefit from a reduced corporate income tax rate of 15%, compared to the national standard of 25%. Additionally, individual income tax subsidies are available for high-end talent in Qianhai and Nansha.​
• Financial services: Qianhai serves as a pilot area for cross-border financial services, including digital RMB trials. Foreign banks are permitted to establish wholly-owned subsidiaries, enhancing financial sector openness.​
• Technology and innovation: Support mechanisms such as intellectual property protections, R&D subsidies, and venture capital incentives are in place to encourage technological advancement.​
• Logistics and trade facilitation: The establishment of bonded warehouses and streamlined customs procedures, including a “single window” system, aims to enhance trade efficiency.​

Economic performance

Since its inception, the GFTZ has demonstrated robust economic growth. By 2023, the combined GDP of the three sub-zones reached approximately CNY 526 billion (£55.15 billion), more than doubling from CNY 224.4 billion (£23.51 billion) in 2015. Foreign trade within the zone surged from CNY 104.7 billion (£10.97 billion) in 2015 to CNY 580 billion (£60.78 billion) in 2023, reflecting an average annual growth rate of 24%. The actual utilisation of foreign capital totalled USD 53.9 billion (£41.22 billion) over this period, with an average annual increase of nearly USD 6 billion (£4.59 billion).​

In the first seven months of 2024, the GFTZ’s total import and export value reached CNY 409.56 billion (£42.91 billion), marking a 24.1% year-on-year increase. Machinery and electrical products accounted for over 60% of this trade, and commerce with ASEAN countries comprised nearly 20%.

Integration with Hong Kong and Macau

A key feature of the GFTZ is its role in fostering deeper economic integration with Hong Kong and Macau. In Hengqin, Macau enterprises can operate under Macau laws within designated areas, exemplifying the “one country, two systems” principle. Qianhai and Nansha offer preferential policies for Hong Kong firms, including lower thresholds for professional services and mutual recognition of qualifications.​

Future development plans

Looking ahead, the GFTZ aims to align more closely with international high-standard trade and economic rules, promoting institutional openness. Plans include the development of Nansha’s “Science City”, focusing on AI and biotechnology, pilot programs for blockchain and data trading, and infrastructure projects like the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hengqin-Macau Light Rail, expected to enhance regional connectivity.​

Conclusion

The Guangdong Free Trade Zone has emerged as a dynamic hub for economic reform and international trade. Its strategic initiatives and policy innovations have not only spurred regional growth but also set a precedent for future free trade zones in China. As it continues to evolve, the GFTZ is poised to play a pivotal role in China’s ongoing economic transformation and integration with global markets.

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Reining in industry’s contribution to carbon emissions will be key to fulfilling China’s carbon neutrality policy. The 230 national economic and technological development zones (NETDZs) that the Ministry of Commerce (MofCom) has approved to date are responsible for 11% of China’s GDP despite only occupying 0.32% of its geography. Targeted and localised action aimed at making the country’s economic zones more environmentally friendly, therefore, holds enormous potential in terms of making Chinese industry greener more broadly.

While numerous economic zones have been quick to adopt green principles when considering their development, further funding is required to realise a green transition of such magnitude. Analysts estimate that China will need to invest over RMB 100 trillion over the next 30 years to reach its goal of carbon neutrality. While extraordinarily high, that number is not an impossible target given that China manufactures much of the technology and equipment necessary for decarbonisation. And the country should expect to continue to receive significant investment – both foreign and domestic – in its green industries as a result.

But a sophisticated policy framework will be required, too. Unfortunately, that is something that is lacking at present. China’s 14th Five-Year Plan simply commits to reducing the carbon and energy intensity of China’s GDP growth. It lacks specific targets. Thankfully, local governments are taking the initiative to formalise their province’s contributions to achieving carbon neutrality. The Hainan Free Trade Port initiative, for example, has put green finance, ecologically-friendly tourism and research and development into green technologies at the centre of its development agenda. Beijing has followed suit in the pursuit of its new professional services pilot free trade zone, and the same negative list for trade and services in Hainan will also be applied in the nation’s capital.

According to MofCom, 36 NETDZs have made “outstanding achievements in green development and upgrading”, but that means there is a still long way to go in terms of harnessing these areas so that they can drive China’s green transition.

Firstly, as industrial clusters, NETDZs have high energy consumption and carbon emissions, the latter of which accounts for 10% of the entire country’s carbon emissions. With various industries and complexities found within the zones, a green transition will be more difficult than it would be for other areas. Secondly, coal still dominates the power supply; transitioning to 100% clean energy within the zones will be a difficult undertaking. Thirdly, the imbalance and mismatch in energy supply and storage between China’s eastern and western regions pose additional challenges. Lastly, there will be no ‘one size fits all’ green technology, strategy, or solution for industries located within the NETDZs, as they have various different technical requirements for carbon reduction.

China’s economic zones have become key to China’s efforts to pursue a green transition and industrial upgrading, and we welcome the growing UK-China collaboration in this field – Andrew Seaton, Chief Executive, China-Britain Business Council

Opportunities for UK-China collaboration as NETDZs go green

COP26 made it clear that international cooperation will be crucial if the goals of emissions reduction and environmental protection are to be achieved. As two of the largest economies, the UK and China not only have important roles to play, but they also have much to benefit from mutual cooperation in green development and technology.

There is great potential for cooperation between the UK and China if both countries play on their strengths to mutually work towards sustainability. UK manufacturing’s strengths, for example, lie in early-stage R&D and technology as well as later-stage servitisation, end-of-life innovation, and high-value manufacturing. On the other hand, China’s strength in manufacturing lies in the medium stage, where production and distribution take place. By taking manufacturing as an example, both countries’ strengths are found at different stages, and thus cooperation between the two will allow for both countries to fill in where they are least proficient and achieve a win-win scenario.

China needs assistance in pursuing structural reform so that it has the policies and institutions in place to support green development and innovation, not only within its various specialist zones, but across the economy at large. UK-China collaboration to this end has been successful so far. The Sino-UK Innovation Industry Park in the coastal city of Qingdao is one example, and hosts several British companies at the cutting edge of R&D in areas such as green and intelligent manufacturing, marine conservation, and AI and big data processing for manufacturing systems.

In the future, when investing in NETDZs, UK companies should pay attention to the NETDZs’ entry requirements, local industry preferences and green technologies, among others. More specifically, foreign investors should:

• Do research and verify whether their own line of business could fit within the industries currently being promoted.
• Evaluate the green, scientific and technological attributes of their own industries and ensure that they meet the green development requirements of NETDZs, so as to achieve more synergy and high-quality development.
• Create a proactive dialogue with the local government of the intended investment areas and explore the availability of potential policies and financial support provided by local government so as to achieve optimal performance by aggregating their own advantages with external facilitation.

Conclusion

Achieving carbon neutrality across China’s NETDZs will be key to hitting the country’s target of net zero by 2060. Given that there are only 230 of these zones and that they are collectively responsible for 11% of GDP, targeted action within these areas will have a disproportionate effect on the country’s ability to go green as a whole. In short, the NETDZs are an easy and effective place to start in terms of improving Chinese industry’s green credentials. “China’s economic zones have become key to China’s efforts to pursue a green transition and industrial upgrading. We welcome the growing UK-China collaboration in this field, and building on our Net Zero Report released at COP26, and believe that the UK and China working together offers great potential in tackling the critical environmental challenges we face,” says Andrew Seaton, Chief Executive, China-Britain Business Council.

While the green transition is an area where the UK has enjoyed a fruitful collaboration with China to date and will continue to do so into the future, whether China hits its target will require the implementation of a sophisticated policy framework that comes from the top. Local leaders in Beijing, Shanghai and Hainan should be commended for taking steps to draft policies that will make their own industrial areas more environmentally friendly, but their locales remain the exception and not the rule. There remain 200 NETDZs in need of reform if China is to rise to the enormous challenge its president has set. The clock is ticking.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research services can help you build knowledge and understanding of the Chinese market prior to investment.

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The Greater Bay Area (the area linking Hong Kong, Macau, and nine cities in mainland China around the Pearl River Delta including Guangdong and Shenzhen) was conceived as an integrated economic and commercial hub, designed to make doing business in the region easier.

While the GBA’s various free trade and high-tech zones do make it an attractive place to do business, understanding which preferential policies each one offers and which one is right for your business can be confusing. This article offers a brief explanation of each of the types of zones found in the GBA. However, it is worth noting that these definitions and the areas they apply to are subject to frequent change, so it is always best to check with an expert before embarking on a project in the GBA.

State-level new area 国家级新区

This is an urban area that has been given an “administrative readjustment” by the central government and receives preferential policies and privileges granted directly by the State Council. A new area is fairly small, geographically speaking, usually a designated district in a city. Through the establishment of a new area, the central government is signalling that it wants to drive the economic development of that particular area, alter its development trend and ultimately create a rippling economic impact.

China currently has 19 state-level new areas. In the Greater Bay Area, Guangzhou’s Nansha and Zhuhai’s Hengqin are New Areas. Others around the country include Shanghai’s Pudong New Area and Xiong’an in Hebei province, the newest, established in 2017.

Special economic zone 经济特区

This is the name given to the original experimental economic jurisdictions first introduced in the late 1970s at the beginning of reform and opening up. Shenzhen and Zhuhai were two of the earliest because they are located opposite the two SARs (Hong Kong and Macau). The scope and focus of SEZs vary, but most boast economic policies such as tax incentives for foreign investment and greater independence from the central government on international trade activities, and have a focus on export-oriented production.

Besides these, there are also Pilot Zones for Comprehensive Reforms (综合改革试验区). They are similar, but more focused on particular issues, such as coordinated development between urban and rural areas, or how to strike a balance between environmental protection and economic development.

Economic & technological development zone 经济技术开发区

These are zones that are set up to follow particular industrial development trends in the context of regional development. They became popular in the late 1980s and the early 1990s when the government tried to group companies into industrial clusters. Enterprises in the development zones are granted preferential policies for land usage or tax deductions.

China has a total of 219 state-level economic and technological development zones. Jiangsu province leads with 26, followed by 21 in Zhejiang and 15 in Shandong.

Guangdong has six, located in Zhanjiang, Guangzhou, Nansha, Daya Bay (Huizhou), Zengcheng (Guangzhou) and Zhuhai.

High-tech zone 高新区

High-tech industries have always had plenty of government support. The Ministry of Science and Technology is highly involved in the development of these zones, often providing detailed guidelines on which high-tech zone should focus on which sector.

Each of the nine mainland GBA cities has a state-level high-tech zone. The one in Shenzhen’s Nanshan district is ranked second only to Beijing’s Zhongguancun (often called China’s Silicon Valley and the birthplace of companies like Lenovo) among China’s 157 state-level high-tech zones. Shenzhen’s aims to focus on four industries, namely electronic information, bioengineering, new materials and opto-mechatronics.

Dongguan’s Songshan Lake Hi-Tech Zone is seen as an up-and-coming star. It focuses on high-end electronic information, biopharmaceuticals, robotics, new energy and modern service industries

Guangzhou is no slouch, either. Its high-tech zone in the east of the city was established in 1991 and currently ranks ninth nationally. It is home to Guangzhou Science City, Guangzhou Tianhe Software Park, Huanghuagang Technology Park, Non-Governmental High-tech Park and Nansha IT Technology Park.

Dongguan’s Songshan Lake Hi-Tech Zone is seen as an up-and-coming star. It focuses on high-end electronic information, biopharmaceuticals, robotics, new energy and modern service industries. Foshan’s Hi-Tech Zone specialises in automobile and component manufacturing, high-end equipment manufacturing, new materials, smart home appliances, life sciences and optoelectronic technology.

Free trade zone 自贸区

Free trade zones are generally province-sized areas — Guangdong is a Free Trade Zone, for example — and are not necessarily as free as the name implies, i.e. regulations related to tariffs, approvals and management are flexible, not free.

Twelve of China’s provinces are currently designated as Free Trade Zones, including Shanghai, Guangdong, Tianjin, Fujian, Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan, Shanxi and Hainan.

That being said, it is not the whole province that implements this flexibility. Guangdong’s zone actually only includes three districts: Guangzhou’s Nansha, Shenzhen’s Qianhai and Zhuhai’s Hengqin.

This post originally appeared on our content partner Greater Bay Insight

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Hainan is an island located off the south coast of Mainland China. The province is known as the Hawaii of China due to its sandy beaches, lush forests and tropical climate. Over 67 million tourists visit Hainan last year, with several hundred thousand coming from abroad, helping its tourist industry to grow to US $13 billion. Traditionally, Hainan’s economy has been dominated by agricultural and tourism but it is now rapidly growing into a healthcare hub.  Deng Xiaoping made Hainan a Special Trade Zone (STZ) back in 1988 and, in 2013, the State Council approved the ‘Hainan Boao Lecheng International Medical Tourism Pilot Zone.’

The Pilot Zone aims to boost medical tourism with a focus on franchised medical care, health management, rehabilitation care, medical beauty and anti-ageing services. The Zone covers 20 square kilometres and will be built on a low-carbon, low-emission model. Located along the Wanquan River near Qionghai City the Zone will be near Boao – the area that holds the Asia Boao Economic Forum, known as the Davos of the East.

As well as providing medical tourism, the zone aims to become a leading national medical science research base. The Pilot Zone includes a number of preferential policies, including faster import registration of medical products and medicines, a special import tariff for foreign medicines, a three-year practising period for foreign physicians and it will allow foreign investors to invest in medical institutions. The Boao Lecheng Pilot Zone is a demonstration project for the nation’s healthcare reform that might be rolled out across other cities in the future.

The province will develop into a pilot Free Trade Zone, and a Free Trade Port would be established

Last month one of the first major hospitals opened in the Pilot Zone. The Boao Super Hospital will offer high-end medical services to the public. The private hospital is one of 27 projects that have opened or are under construction in the Zone that are expected to be complete in five years.

At the end of April, President Xi Jinping said, at an event to mark the 30^th anniversary of the establishment of Hainan’s Special Economic Zone, that the province would develop into a pilot Free Trade Zone, and a Free Trade Port would be established. The news caused shares in many Hainan based companies to rise significantly. State news agency Xinhua said the pilot will focus on sectors including agriculture, medical care, sports, telecommunication and finance. It is expected that the Free Trade Port will be up and running by 2025 and fully established by 2035.

The Free Trade Port will also allow duty-free shopping, which is expected to further boost tourism. The pilot Free Trade Zone will also allow horse racing and sports lotteries. While Beijing bans all forms of gambling, horse racing is not illegal and China runs two types of lotteries.

Fact box

Size: 35,000 sq km (13,500 square miles)

Population: 9.3 million

Capital: Haikou

Tourist numbers: 67 million

Key industries

Tourism

Agriculture

Healthcare

Finance

Sports

For more information on Hainan contact: sally.zhang@cbbc.org.cn

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