Exclusive | Shanghai mulls fivefold expansion of free-trade zone in bid to attract foreign capital

Shanghai is considering expanding its free-trade zone fivefold to as big as 600 square kilometres, and include two areas where US electric carmaker Tesla and Malaysian hospital operator IHH Healthcare are already active, to increase its appeal to foreign investors.

The new expanded area will include Lingang and Hongqiao, located to the west of the Huangpu River that cuts through the city, according to sources. The city government is expected to unveil detailed expansion plans for the 120 square kilometre zone in the first half of 2019, after it receives an approval from the central government in Beijing. The sources did not confirm the exact size of the expanded zone.

“Service sectors including finance and medicine will be a focus during the further development of the Shanghai free-trade zone,” said Chen Bo, professor at the Huazhong University of Science and Technology and an adviser to local governments, including that of Shanghai. “Generally, it will be easier for foreign investors to set up their operations in the zone.”

Tesla signed an agreement with the Shanghai government in July this year to build its US$2 billion Gigafactory 3, its first production facility outside the United States, in Lingang, which covers 360 square kilometres. The facility is expected to produce 250,000 electric vehicles a year.

IHH Healthcare is active in Hongqiao, which covers 90 square kilometres and hosted the China International Import Expo (CIIE) in November. The company is building a US$200 million hospital with 450 beds, which is expected to open in 2020.

Chinese President Xi Jinping announced at the CIIE that Beijing would let Shanghai expand its free-trade zone, highlighting China’s commitment to globalisation by widening access to its domestic markets amid a trade war with the United States.