Shanghai gets green light to set up duty-free customs area to facilitate direct global trade, in a move that bypasses Hong Kong

A fenced customs area will be established at Shanghai’s Yangshan Deep Sea Port and at the Lingang free-trade zone (FTZ)

Cargo inside the area will be exempted from import duties, according to the November 4 circular by the The General Administration of Customs

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Phase IV of the Yangshan Deep Water Port in Shanghai on July 25, 2018. Photo: Xinhua

Published: 8:27pm, 13 Dec 2019Updated: 10:58pm, 13 Dec 2019

China’s government has given the green light to set up a duty-free zone at Shanghai’s port and the city’s free-trade zone, in the biggest step yet to bypass Hong Kong as the midway stop in easing global commerce with the worldwide marketplace.

A fenced customs area will be established at Shanghai’s Yangshan Deep Sea Port and at the Lingang free-trade zone (FTZ), where cargo inside the bonded area will be exempted from import duties, according to the November 4 circular by the The General Administration of Customs, a copy of which was obtained by South China Morning Post.

“The zero tariff policy to be implemented inside the zone means that a concrete step has been taken towards largely bolstering international trade via Shanghai,” said Chen Bo, a professor at Huazhong University of Science and Technology, and an adviser to local governments including Shanghai. “The bonded area will sport an offshore status that encourages free commodity flows.”

Shanghai’s entire bonded territory at Yangshan - the world’s largest container port in 2018 - and Lingang measures 137.8 square kilometres (53.2 square mile), larger than the combined area of Kowloon and Hong Kong Island. The total duty-free area in mainland’s premier commercial hub was given a boost in August when the Chinese government allowed Shanghai to add Lingang into the area, and demarcated the Yangshan port – connected by the 32-kilometre Donghai Bridge – to double the size of the FTZ.

The incentives given to Shanghai, similar to those handed out to Shenzhen in southern China and elsewhere, are coming at the end of a tumultuous year for Hong Kong, which has been rattled for the past six months by the city’s worst political crisis.

Anti-government protests, interrupted by frequent bouts of violence and vandalism, have shaken the confidence of foreign investors and businesses in the city. The role of Hong Kong, the traditional middleman in China’s trade link with the world, has also been brought into question as the year-long US-China trade war drove many factories to relocate their mainland China factories to Southeast Asia to skirt US tariffs.