Other BriefingsChina’s Free Trade Zone Expands to 23 with Inner Mongolia Addition
Approved on April 9, 2026, China’s Inner Mongolia Pilot Free Trade Zone (FTZ) brings the country’s total number of FTZs to 23, completing the national FTZ map and positioning Inner Mongolia as a strategic gateway to Russia and Mongolia. The zone integrates rare earth supply chains, AI computing infrastructure, and cross‑border rail logistics into a single policy platform.
On April 9, 2026, the State Council approved the establishment of the China (Inner Mongolia) Pilot Free Trade Zone in a circular issued to relevant local authorities, bringing China’s total number of pilot free trade zones (FTZs) to 23. The zone was officially inaugurated two days later, on April 11, at a ceremony in Hohhot.
In many respects, the new zone represents the final piece of an FTZ map that has been two decades in the making: a network that now stretches from Hainan in the south to the Russian and Mongolian border in the north, with every major province, autonomous region, and municipality now represented.
Unlike the FTZ additions of recent years, which have largely served to deepen financial services integration (Hainan), cross-strait economic links (Fujian), or Greater Bay Area (GBA) cooperation (Guangdong), the Inner Mongolia FTZ is built around a fundamentally different proposition. Its logic is geographic and strategic rather than sectoral: Inner Mongolia shares over 4,200 kilometers of border with Russia and Mongolia, hosts the world’s single largest rare earth deposit at Bayan Obo, and has quietly become one of China’s most significant data center and AI computing hubs. The FTZ designation is China’s signal that it intends to formalize and scale all three of these advantages within a single, integrated policy zone.
This article sets out the policy framework, the investment landscape, the sectors with the clearest entry routes for foreign investors.
Background: China’s FTZ Network and the “missing piece” in the North
China’s pilot FTZ network began in 2013 with the establishment of the Shanghai Pilot Free Trade Zone, which encompassed four existing bonded areas in Pudong. Since then, the network has expanded in three broad waves: coastal zones in Tianjin, Guangdong, and Fujian (2015); inland and western zones in Chongqing, Sichuan, Shaanxi, and others (2017); and a further expansion across the remaining provinces from 2019 onward, including the designation of the entire island of Hainan as a free trade port in 2018, the network’s largest and most ambitious zone to date. The Xinjiang FTZ, established in 2023, was the 22nd. Inner Mongolia is the 23rd.
According to the Ministry of Commerce (MOFCOM), China’s 22 FTZs attracted US$282.5 billion in foreign capital in 2024, accounting for 24.3 percent of the country’s total inbound foreign direct investment – a striking figure for zones that collectively represent only a small fraction of China’s total land area. Over the course of the 14th Five-Year Plan (2021-2025), the zones piloted over 200 institutional innovations, many of which were subsequently replicated nationally. This testbed function – the capacity to trial regulations before rolling them out across the economy, is one of the FTZ network’s most consequential contributions to China’s reform agenda.
Inner Mongolia’s absence from this network until now stood in sharp contrast to its role in cross‑border trade. The region shares borders with Russia and Mongolia across more than 4,200 kilometers, hosts two of China’s busiest land ports, Manzhouli (Russia) and Erenhot (Mongolia), and its Ganqimaodu port is China’s largest coal import gateway from Mongolia. Yet none of this cross-border trade activity was supported by FTZ-level customs facilitation, investment streamlining, or the broader regulatory reform toolkit available to zones elsewhere. In this sense, the April 9 State Council circular addresses that gap directly.
The timing is also deliberate in a broader policy sense. In April 2025, the CPC Central Committee and State Council issued the Opinions on Implementing the Free Trade Pilot Zone Enhancement Strategy (hereinafter, the 2025 Opinions), a document proposing sweeping regulatory easing across the existing FTZ network, covering goods trade, service trade, digital trade, financial sector opening, cross-border data flows, and talent mobility.
The Inner Mongolia approval fits squarely within this renewed push. As Fan Lijun, director of the Belt and Road Initiative(BRI) Research Institute at the Inner Mongolia Academy of Social Sciences, summarized: “From the southern coast to the northern border areas, China’s FTZ network is evolving from individual breakthroughs to systematic integration.”
Inner Mongolia FTZ structure
The Inner Mongolia FTZ covers 119.74 square kilometers in total, divided across three geographically distinct subzones: 76.28 square kilometers in Hohhot (the regional capital), 25.11 square kilometers in Manzhouli (the Russia border gate), and 18.35 square kilometers in Erenhot (the Mongolia border gate). This structure, with one capital-city hub and two border-port subzones separated by hundreds of kilometers, is unusual within China’s FTZ network, and it reflects the fact that the zone’s core purpose is not to create a single integrated industrial park, but to link three distinct nodes in a wider trade and logistics corridor.
According to the State Council circular and the press briefing delivered by Liu Yongming, deputy director of the Inner Mongolia regional commerce department, on April 10, each subzone has been assigned differentiated functions and is expected to develop industries “tailored to local conditions.”
The circular specifies 19 reform and innovation measures to be trialled across the zone, with local governments encouraged to adapt implementation based on their specific conditions. MOFCOM is tasked with overseeing coordination and replicating successful reforms across the broader FTZ network.
| Subzone | Area | Priority sectors | Strategic mandate |
| Hohhot | 76.28 km² | Green computing; AI data infrastructure; biomedicine; new energy; new materials; next-gen IT | Capital hub and innovation cluster. Anchors the Inner Mongolia Data Exchange Center (1,050 enterprises; RMB 1.18 billlion, or US$172 million, in cumulative transactions). Hosts the Horinger New Area biopharma park. |
| Manzhouli | 25.11 km² | Imported resource processing; cross-border logistics; China-Europe rail freight; cross-border finance; tourism | China’s busiest rail port for China-Russia trade and the eastern gateway of the China-Europe Railway Express. Handled 4,867 China-Europe trains in 2025 (+11.2% YoY); return trains reached a record 2,977 (+21%). |
| Erenhot / Ganqimaodu | 18.35 km² | Energy corridor (coal, renewables); agricultural trade; cross-border e-commerce; smart port logistics | China’s largest coal import gateway from Mongolia. Ganqimaodu-Gashuunsukhait cross-border railway under construction (started May 2025) –only the second new rail link between the two countries in 70 years. First driverless AGV cross-border route in China. |
Policy framework
The April 9 circular sets out the zone’s overarching ambition: to build Inner Mongolia into “a hub for information exchange, transportation and logistics, allocation of factor resources, scientific and technological innovation, and industrial cooperation in key areas, connecting domestic and international markets while radiating to neighbouring regions.”
That is a broad mandate, but the document also enumerates specific measures across five thematic areas that are worth examining in detail.
Trade facilitation and border commerce
The circular calls for three distinct reforms to trade facilitation: upgrading trade in goods, “injecting more vitality” into service trade, and innovating approaches to border trade – a category that encompasses the smaller-scale, often community-level commerce that has historically characterized China’s land border crossings. On the border trade point, the circular signals an intention to formalize and scale these flows through structured logistics and inspection frameworks, and to “establish cooperation mechanisms with neighbouring countries in inspection, testing, and certification.”
In practice, this means companies engaged in trade with Russia and Mongolia can expect a gradual harmonisation of standards that reduces the cost and administrative burden of moving goods across the border, a meaningful change for businesses dealing with the current patchwork of bilateral inspection requirements. The zone’s 2026 cross-border e-commerce target of exceeding RMB 5 billion (US$732.02 million) in turnover, backed by logistics infrastructure supporting next-day delivery to Mongolia and one-week delivery to Russia, gives a concrete sense of the timelines involved.
Logistics, rail, and port economy
The circular specifically calls for enhancing the zone’s “service capacity in international logistics, cross-border freight trains, and the development of the port economy.” This is a reference to the China Railway Express (also known as the China-Europe Railway Express, or CR Express) trains that run through Manzhouli toward Europe, a route that has grown sharply in volume since 2022 as some shippers sought overland alternatives to maritime routes. In 2025, Manzhouli Customs data showed 4,867 China-Europe freight trains passing through the port, an 11.2 percent increase year-on-year, handling 506,000 TEUs.
Notably, the number of returning trains reached 2,977 (the highest in the country) a 21 percent jump that reflects growing two-way trade flows rather than the one-directional outbound shipping that characterized earlier years.
At Ganqimaodu, a port the circular includes in the Erenhot subzone, the zone will pilot a “digital intelligent one-stop channel” reform in 2026 to streamline entry procedures for foreign drivers. This port has also launched China’s first cross-border transport route using driverless automated guided vehicles (AGVs), positioning it as a test case for smart port technologies that could be replicated elsewhere in the network.
The three comprehensive bonded zones in Hohhot, Ordos, and Manzhouli are collectively targeting RMB 12.2 billion (US$1.78 billion) in bonded processing and trade value in 2026, up 20 percent year-on-year.
Investment facilitation and mutual cooperation
The circular calls for both intensifying efforts to attract foreign investment and deepening outbound investment and cooperation. This dual focus is characteristic of China’s more recent FTZ policy documents, which recognize that the zones must serve Chinese firms expanding abroad as well as foreign firms entering China.
In Inner Mongolia’s case, the outbound component is particularly significant: the zone is explicitly positioned as a platform for the China-Mongolia-Russia Economic Corridor, one of the six major economic corridors identified under the BRI. Companies based in the zone could in principle use it as a staging ground for investments in Mongolian mining, Russian energy, or Central Asian logistics.
On the inbound side, the circular flags a points-based work permit scheme and faster processing for skilled foreign workers. Local commerce department officials have indicated that similar incentives may be prioritized for rare earth processing joint ventures that rely on overseas metallurgical expertise.
Inner Mongolia FTZ investment landscape: Sectors, opportunities, and entry routes
The Inner Mongolia FTZ’s investment case is concentrated in a small number of sectors where the zone’s specific geographic, industrial, and policy advantages converge. It does not offer the broad financial liberalization of the Hainan FTP, nor the advanced manufacturing ecosystem of the Shanghai Lingang New Area.
What it does offer is a set of specific first-mover advantages in sectors that are strategically important to China and that have no equivalent entry point elsewhere in the FTZ network. We assess each below.
Green computing, AI infrastructure, and data center investment
This is, in our assessment, the sector with the clearest near-term opportunity for foreign investors in the Inner Mongolia FTZ. The structural advantages are not policy-dependent (vast land, cold climate, abundant renewable power, and Beijing latency) and the FTZ’s designation as a “green computing power support hub” adds a layer of preferential regulatory treatment on top of these pre-existing assets.
The Inner Mongolia government doubled its autonomous region-level science and technology special funds in 2026, with AI and computing explicitly among the priorities, alongside rare earths and green hydrogen.
For foreign technology companies, the most practically significant development is the forthcoming negative list for cross-border data trading. Under China’s national data protection framework, including the Personal Information Protection Law (PIPL) and the Data Security Law, companies transferring data across borders are currently required to undergo security assessments, sign standard contracts with overseas recipients, or obtain third-party certification.
These requirements are operationally burdensome for multinational firms that routinely move data between their Chinese operations and their global systems. The Inner Mongolia negative list, modelled on those already published by Tianjin,Shanghai (Lingang), Beijing, Hainan, and Zhejiang, would allow unrestricted export of data not on the list, a material reduction in compliance overhead.
Cross-border logistics, bonded warehousing, and China-Europe rail freight
The logistics sector is the FTZ’s most immediately actionable opportunity, because the underlying infrastructure is already operational and growing fast. Manzhouli is one of two major eastern gateways for the China-Europe Railway Express (the other being Erenhot), and its freight volumes have grown steadily even as global supply chain pressures have shifted.
Within the FTZ framework, bonded zone treatment means that goods can be stored, sorted, and processed within the zone without triggering import tariffs or VAT until they enter the Chinese domestic market. For logistics operators, this enables bonded warehousing and distribution strategies that reduce cash flow tied up in duties. For manufacturers using imported inputs, it reduces the cost of holding inventory. The zone’s 2026 targets are meaningful benchmarks for companies assessing market sizing.
Companies already operating in the Erenhot land-port cluster have indicated they expect the FTZ to reduce import-export paperwork by approximately 30 percent once the new customs systems go live, according to VisaHQ reporting on the zone’s launch. The “digital intelligent one-stop channel” being piloted at Ganqimaodu in 2026, which will simplify entry procedures for foreign drivers crossing the China-Mongolia border, is an early signal of the operational changes that FTZ status is expected to catalyze.
Rare earth and critical minerals supply chain integration
Inner Mongolia hosts the Bayan Obo mine, the world’s largest rare earth deposit, which accounts for more than 40 percent of the world’s known rare earth element reserves and approximately half of global rare earth production. China Northern Rare Earth Group, headquartered in Baotou (Inner Mongolia), is the world’s largest rare earth producer by volume, with projected 2026 output of 58,800 tonnes, approximately 40 percent of global supply.
Regional development plans through 2035 emphasise the upgrading of the rare earth value chain from basic concentrate extraction toward higher value-added functional materials. These include permanent magnets for electric vehicles and wind turbines, advanced alloys, and specialised inputs for clean energy and advanced manufacturing. This direction aligns with broader national priorities to retain strict control over strategically sensitive upstream segments while promoting innovation and industrial upgrading in downstream applications.
For foreign firms, the Inner Mongolia FTZ does not provide access to upstream activities such as mining, smelting, or separation, which remain prohibited to foreign investment. Its relevance is instead concentrated in downstream and adjacent segments, where participation is possible but subject to tight regulatory oversight. The FTZ’s filing-based establishment system, together with enhanced customs facilitation and support for technology cooperation, improves operational efficiency rather than altering ownership restrictions.
Within this framework, foreign companies active in materials engineering, specialised equipment, R&D, testing, and application-level manufacturing can engage with domestic rare earth groups through structured arrangements. These may include off-take agreements, toll processing, and joint development of downstream products, all within the boundaries of China’s national security and export control regime.-GI
Energy, coal, and the energy corridor opportunity
Mongolia is one of the world’s largest coal exporters, and the majority of its coal exports pass through Ganqimaodu port into China. The Ganqimaodu-Gashuunsukhait cross-border railway, construction of which began in May 2025, will be the second new rail link between China and Mongolia in nearly 70 years: a development that will dramatically increase the throughput capacity of what is already China’s largest coal import gateway from Mongolia. When complete, it will shift the dominant mode of coal transit from trucks to rail, reducing costs, improving throughput, and enabling larger-scale bonded processing operations in the FTZ.
Beyond coal, Inner Mongolia’s renewable energy endowment (the largest wind and solar resource base in China by installed capacity) underpins both the zone’s green computing ambitions and a broader energy trade opportunity. For energy traders, project developers, and companies with exposure to the clean energy transition, the convergence of coal logistics, renewable energy infrastructure, and the green computing power designation within a single FTZ framework is a genuinely novel combination.
Biomedicine, animal-derived biologics, and the Horinger park
Biomedicine is one of the four strategic emerging industries prioritized for the Hohhot subzone, alongside new energy, new materials, and next-generation information technology. The specific opportunity in Inner Mongolia is more niche than in the coastal FTZs, but it is real: the region’s large horse and livestock population has created an established base for animal-derived biologics manufacturing.
The Horinger New Area biopharma park hosts companies such as Inner Mongolia Wanrui Biotechnology, which has turned animal serum (described in press briefings as a biomedical “cell feed”) into an export product.
For foreign pharmaceutical companies, the relevant policy development is the national-level 2025 Opinions, which proposed a “white list” system for R&D-related biopharmaceutical imports, exempting certain imported materials from standard customs drug clearance requirements within FTZs. If implemented as described, this would meaningfully reduce the cost and lead time for companies conducting clinical research or running drug manufacturing operations in the zone, by removing the need for item-by-item customs clearance of research inputs.
Tax and incentive framework
Foreign investors in the Inner Mongolia FTZ operate within two overlapping preferential frameworks: the standard set of FTZ-level benefits that apply across China’s pilot zones, and the regional tax incentives available to enterprises in China’s western regions. The combination of the two, and specifically the interaction between them, is what makes the Inner Mongolia FTZ structurally attractive from a tax perspective.
| Key Incentives | Rate / Terms | Eligibility and Notes |
| Corporate income tax –Western Regions | 15% (standard: 25%) | Primary business in locally encouraged industry; ≥60% of revenue from that activity; valid to Dec 31, 2030. Applies to all Inner Mongolia, not only FTZ. |
| Import tariffs on self-use production equipment | Exempt | Standard FTZ bonded zone treatment. |
| Import-stage VAT and consumption tax | Deferred / 0% | Applies while goods remain in bonded zone; triggered only when goods enter the domestic market. |
| R&D super-deduction (IC / machine tools) | 120% deductible; 220% amortization for intangibles | State-recognized enterprises in eligible sectors; valid to Dec 31, 2027 (Announcement No. 44 [2023]). |
| Cross-border data transfer | Negative list approach (forthcoming) | Data not on the list exportable without full national PIPL/DSL compliance procedures. Operative rules pending. |
| Talent visa / work permit | Points-based scheme; accelerated Z-visa expected | Implementation rules pending from Inner Mongolia Commerce Department. Initial focus on REE and AI talent. |
Outlook
The Inner Mongolia FTZ completes China’s national FTZ map in a geographic sense, but its significance extends beyond the map itself. Its establishment, taken together with 2025 Opinions and the 15th Five-Year Plan’s emphasis on all-around opening up, signals that China’s reform agenda in the FTZ network is moving in two simultaneous directions: deepening the institutional openness of existing zones, and extending the geographic reach of that openness to previously uncovered strategic corridors (through Inner Mongolia).
For foreign investors, the most important signal is the alignment between the Inner Mongolia FTZ and China’s supply chain security priorities. The three industries at the zone’s core, icluding rare earths and critical minerals, energy (coal and renewables), and AI computing infrastructure, are each areas where China is actively seeking to consolidate its position as a global leader and reduce external vulnerabilities. Foreign companies that can position themselves as value-adding participants in these supply chains, rather than as buyers seeking access to Chinese inputs, are likely to find the most durable opportunities in the zone.
The zone’s three-to-five-year timeline to reach high-standard FTZ status, is a realistic acknowledgment that much of the zone’s regulatory architecture is still being built. It also means that the window for establishing early-mover positioning is open now, and that investors who engage with the zone during its formative period will have the greatest opportunity to shape the specific regulatory frameworks that emerge.
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