The Shanghai government is pulling out all stops to draw foreign investment to the Lingang free-trade zone, with the aim of driving up its annual industrial output to 600 billion yuan (US$86.7 billion) by 2022. Mainland China’s commercial and financial capital is looking to better use existing preferential policies – lower corporate income tax, duty-free customs zones and flexible land distribution – to unlock Lingang’s potential and attract top companies from home and abroad, Chen Yin, Shanghai’s executive vice mayor, said on Thursday. Shanghai wants to draw 400 billion yuan in investments to the manufacturing sector by 2022. “New spaces, new momentum and new patterns for high-quality development will be key elements characterising the zone,” Chen said. To put the ambitious target for Lingang into context, Hong Kong’s entire gross domestic product stood at HK$617.4 billion (US$79.7 billion) in the second quarter following a contraction. At 600 billion yuan, the zone, which represents 2 per cent of Shanghai’s geographic size, will also equal 17 per cent of the city’s GDP last year. Shanghai’s aim is to attract names on par with Tesla , the bestselling US electric carmaker, which completed the construction of its Gigafactory 3, the company’s first plant outside the US, at Lingang last year. The US$2 billion factory began delivering Tesla’s Model 3 cars to Chinese consumers this year, and has helped it clinch the title of mainland China’s bestselling electric vehicle manufacturer. The 120 square kilometre zone, which was ordered into existence by Chinese President Xi Jinping in November 2018, was launched 12 months ago with substantial incentives distinct from other FTZs in the country. It reported an industrial output of 66 billion yuan for the first half of this year. During this period, it received about US$300 million in foreign direct investment, only 3 per cent of Shanghai’s total. Shanghai announces policies and incentives to attract investment under fintech hub plan “The government has set an ambitious target, one of turning Lingang into a bustling place with advanced manufacturing industries, free cargo, capital and talent flows, and a new growth engine for the city,” said Eric Han, senior manager with business advisory firm Shanghai Suolei. “But it seems that foreign funds are not yet convinced that Lingang is the best place to invest in.” A “dual circulation” strategy, where Beijing plans to prioritise the development of the domestic market amid worsening relations with the United States and maintain the country’s trade strength, could be a stumbling block for Lingang in its quest for foreign investment, Han added. The FTZ has lowered the corporate tax rate from 25 to 15 per cent for companies in the artificial intelligence, biotechnology and civil aviation sectors. And while, detailed guidelines about zero tariff policies were not revealed, Lingang has been declared a duty-free zone exempt from import duties.