Excerpt from: China Supply Chain and Logistics Strategy
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| November 08, 2005 | | Does China Have a Free Port Policy? | A major obstacle to Shanghai’s development of a free port has been the lack of regulations legitimizing free port policies. In order to become a free port like Hong Kong and Singapore, Shanghai’s General Administration of Customs must develop preferential policies. On June 30th 2005, the State Council approved the Yangshan “Free Port”, to be a “Bonded Port” in order to help make the city of Shanghai a free port “in nature”. It is believed that the Yangshan port will receive the freest and most open policies in China and that the development of the Yangshang deep water port and adjacent Lingang Industrial Area is part of a larger plan to integrate or combine this park with the Waigaoqiao Bonded Logistics Park so as to form a “free trade area” of large size with multiple functions. The development of a free port most likely will involve integrating the functions of the free trade area, the bonded logistics park and the export processing zone.
In theory, the free port will allow companies to carry out international carrying trade, distribution, transshipment, processing, and procurement, without Customs duties or regulations being imposed. However, there is a significant gap between theory and practice in China. When Chinese officials speak of “Free Port” in the English language they are actually referring to a “Bonded Port” in the Chinese language. Their conception of this free port entails a port area 8.14 sq km in size = 6 sq km on land and 2.14 sq km on the island which is treated as outside the customs territory in terms of the flow of goods. Goods can move freely in the Bonded Port as it is a free port in nature, but it will probably not be a true free port that the English wording of free port suggests.
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