Finding Your “Comfort Zone”: A Guide to Industrial Parks in the Yangtze River Delta (Part 2)

Posted by Reading Time: 5 minutes

By Rainy Yao

SHANGHAI — Over its four years of development, the Yangtze River Delta (YRD) Economic Region has taken a leading role in China’s economy. In 2013, the region’s GDP was close to RMB10 trillion, accounting for 17.2 percent of national GDP. Attracted by potential revenues and preferential policies, more and more foreign investors have chosen to establish their businesses in the YRD, especially in its many development zones. But given that these zones vary in terms of the tax policies and investment environments they can provide, it can be hard to tell which is right for your business. In this second part of our two-part series, we continue with our comparison of five major types of development zones in the YRD to help foreign investors find the best fit for their specific industry.

Yangtze River Delta Economic Region

3. Export Processing Zones (EPZ) are bonded logistics areas generally located within an existing development zone for the purpose of export processing. Enterprises established in an EPZ can enjoy the following preferential tax policies:

  • Equipment imported by enterprises in the zone will be exempt from import duties and import-related value-added tax (VAT);
  • Exported goods or goods traded between enterprises in the zone will be exempt from VAT and consumption tax;
  • VAT rebates are granted on water, power and gas expenses for enterprises in the zone; and
  • Foreign goods will be bonded upon entry into the zone, while domestic goods can enjoy tax refunds upon entry into the zone.

Example: The Changzhou Export Processing Zone (CEPZ) is located within the CND, covering an area of 1.66 square kilometers. The CEPZ was approved by the State Council in 2005 featuring industrial clusters such as electronics and information technology, mechanical and electrical integration and new materials. Enterprises in the CEPZ can enjoy duty-free import services, export refunds and bonded raw materials tax.

4. Free Trade Zones (FTZ) are designed for export processing, international trade and bonded operations, and are exempt from Chinese customs. Enterprises established within these zones can receive tax refunds on exports, imports and VAT. While many foreign investors will have heard of the Shanghai Free Trade Zone, the zone’s unique package of reforms and extensive coverage by China Briefing warrant its exclusion from our comments here. Another prominent example, the Ningbo Free Trade Zone (NFTZ) has rolled out various policies to support foreign investment. Eligible goods, such as imported equipment, spare parts, building materials and office facilities are exempt from imports duty and import-related value-added tax (VAT). Imported raw materials may be bonded in the NFTZ. Major preferential tax policies for FIEs operating within the NFTZ include:

  • A reduced corporate income tax (CIT) rate of 15 percent;
  • FIEs with an operating period of more than 10 years will be exempt from CIT for the first two years of operations, and eligible for a 50-percent reduction for the 3 years of operations following the FIE’s first profitable year; and
  • VAT refunds for export products made using Chinese materials or Chinese equipment.

Moreover, fiscal support will be provided for manufacturer projects related to advanced technology research.

Example: The Ningbo Free Trade Zone (NFTZ)—comprised of the Ningbo Export Processing Zone and Ningbo Bonded Logistics Zone—is the only free trade zone in Zhejiang Province. Approved in 1992, the NFTZ covers an area of 2.3 km2. Major industries include international trade, advanced manufacturing and logistics. Since its foundation, the NFTZ has become an advanced production manufacturing base and modern logistics center in Zhejiang Province.

5. Bonded Logistics Zones (BLZ) are specifically designed for logistics operations and are usually located near ports or airports to facilitate the aggregation of shipments or assembly. According to the “Measures on Customs Supervision and Control over Bonded Zones,” import duties and import-related taxes on goods entering bonded zones from overseas are handled as follows:

  • Machinery, equipment and other goods and materials required for infrastructure construction projects in bonded zones shall be exempt from duties and taxes.
  • Equipment for production and management, articles for office use, fuel for production, as well as materials and equipment required for the construction of production and storage facilities by enterprises in bonded zones shall be exempt from duties and taxes.
  • Equipment for management and articles for office use required by administrative institutions in bonded zones shall be exempt from duties and taxes.
  • Raw materials, spare parts, components and packaging materials required by enterprises in the bonded zones for the processing of export goods shall be treated as bonded goods.

Example: The Nantong Bonded Zone (NBD) consists of two parks: Park A specializes in port logistics services, integrated services and innovation-oriented businesses. Park B will be located near the Yangtze River and focus primarily on port logistics, bonded logistics and bonded processing. Goods entering the NBD from any region within China shall be exempt from inspection and quarantine.

As seen in the above, there are many options for where to set up manufacturing and logistics operations in the Yangtze River Delta, each with its own package of preferential policies. Finding one’s “comfort zone” requires a careful consideration of the needs of your business, such as provided by the professional tax and legal advisory team of Dezan Shira & Associates.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

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