This Chinese free trade zone will include the first Tesla Gigafactory outside the US

Shanghai FTZ to encompass newly reclaimed land home to the $2bn Gigafactory 3

Tesla Gigafactory Shanghai

China is formally expanding the Shanghai Free-Trade Zone (FTZ) to encompass a newly reclaimed area housing an American-owned industrial project, the State Council announced Tuesday via the South China Morning Post.

Lingang, a land reclamation in southeastern Shanghai, will benefit from a raft of tax incentives and duty waivers as the newest section of the FTZ.

Tesla’s first Gigafactory outside the US broke ground in the area in January. The American automaker’s social media posted new construction photos today of the electric vehicle (EV) factory, the first in China to be wholly owned by a foreign automaker.

Chinese vice-commerce minister Wang Shouwen called the FTZ expansion an “important step to demonstrate China’s clear stand for all-round opening up” and its “active role in guiding the healthy development of economic globalisation.”

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Duties will be deferred on certain shipments passing through the Lingang section of the FTZ. Shanghai vice-mayor Chen Yin also promised bonded or tax exemptions for international goods passing through customs areas of the area.

A fenced section in Lingang will offer special tax policies on goods from abroad as well as products and services between companies in the area. For companies that engage in such high-tech industries as integrated circuits, artificial intelligence, biomedicine and civil aviation, Lingang will be offering reduced corporate income tax rates.

Tesla is due to open the USD2-billion Gigafactory 3 this year. “Given Chinese customers bought well over a half-million mid-sized premium sedans last year, this market poses a strong long-term opportunity for Tesla,” the carmaker said in a statement accompanying the release of its Q2 2019 financial results.

The Chinese government has set aside a CNY100-billion (USD14 billion) special development fund luring top talent and infrastructure to Lingang over a five-year period, the Post noted.