Shanghai Waigaoqiao Bonded Logistics Zone, China's first logistics park linking a bonded zone with the port area, will enter into operation Thursday.

This is a significant step to enabling Waigaoqiao Bonded Zone to function as a Hong Kong-like port.

The 1.03-square-kilometer logistics zone will extend the function of the 10-square-kilometer Waigaoqiao Bonded Zone, the country's first of its kind, in terms of cargo transferring, distribution, procurement and warehousing.

Industrial insiders said the move will help Shanghai become an international shipping hub and boost trade.

Waigaoqiao is China's first trial to turn a bonded area into a free trade zone following an approval in December last year by the State Council, China's cabinet.

"The decision is made because policy advantages of bonded areas are lessened with the foreign trade right available to more and import tariffs keep declining," said Bian Zuyao, director of Shanghai Customs House.

"In addition, the booming export processing zones have reduced its edges in export-oriented processing," he added.

Goods entering the new logistics park will be regarded as exports which have left the country and exporters can redeem tax rebates immediately. Before that, only goods that have left the port were regarded as exports.

In addition, goods in the park can be parted and regrouped and then shipped to various destinations. Previously, all the goods needed to be kept in the containers during shipping.

Companies can also stock goods in warehouses in the park and ship them out when necessary. The zone will help the port to be a location for transit trade.

On March 23, four companies moved into the park. Another 12 shipping and logistics service providers including P&O Nedlloyd, one of the world's leading shipping operators, and Nippon Express Co Ltd, Japan's largest logistics service provider, will sign onto the logistics zone today, according to Zheng Weihua, a marketing official with Shanghai Waigaoqiao Logistics Center Co Ltd, which helps run the logistic park.

Nearly 6,800 companies, including Intel, IBM and General Motors have been registered in Waigaoqiao by the end of last month with contracted foreign funds of US$4 billion.

Trade through the zone hit US$21.8 billion last year, up 82.4 percent year on year, Shanghai Customs said.

China began to set up bonded zones in 1990 and currently has 15 such zones.

In addition to Shanghai's Waigaoqiao, the country is also considering running similar trials in Shenzhen's Yantian in Guangdong Province, Qingdao in Shandong Province and Tianjin Municipality.

Most of the bonded zones in China handle import and export operations similar to those of economic and technological development zones.

The country is expected to finish the trials by the end of 2006 and establish two or three world-class free trade zones by 2015.

Part of the ports will be used as extended logistics chains of bonded zones, where convenient transportation will help simplify goods distribution formalities and reduce companies' production costs.

Internationally, a free trade zone also offers financial and logistics services. In China, a bonded zone is not allowed to provide offshore market business, and logistics services such as storage, distribution and transportation are not fully developed.

The thorniest problem in logistics is the separation of bonded zones from ports, meaning goods cannot move directly from ports to bonded zones since they have to go through the customs inspections of both.

"The new policy is appealing to international shipping operators to transit their freight in Shanghai," said Xu Peixing, the director of Shanghai Municipal Port Administration Bureau.

"It's quite an important step for Shanghai to realize its aim of an international shipping hub as the move helps remove the bottleneck of policy."

(eastday.com April 15, 2004)