Guangxi Province To Start Free Trade Zones

by Mary Swire, Tax-News.com, Hong Kong

20 August 2002

Vice-chairman of China's Guangxi province Zhang Wenxue said yesterday that the province is seeking approval from Beijing to set up free trade zones and export processing zones similar to those in its neighbour province Guangdong, where they have been highly successful.

Mr Zhang said his province proposed to set up a bonded zone for export processing in the southern port city of Beihai, and a free trade zone in the two cities that border with Vietnam, Dongxing and Pingxiang.

There is some doubt about the future of tax incentives offered to companies in such zones now that China has joined the WTO. The EU regards them as constituting 'unfair state aid' in many cases, and might well bring a complaint if they are used by exporters to Europe.

In 1996, Beijing earmarked Guangxi to be the gateway to the sea for the landlocked southwestern provinces of Yunnan, Sichuan and Guizhou; as a result, railways and highways now connect the inland southwestern provinces to Guangdong through Guangxi.

"As we are advantageously located, we must seize this opportunity," Mr Zhang said, adding that foreign investment had been projected to account for a third of the 450 billion yuan (about US$600 billion) total investment to be pumped into the province in the 10th Five Year Plan. Free trade zones are seen as a crucial part of creating attractive conditions for foreign investment.

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