23 July 2019

Aviation services to take wing at Shanghai FTZ

Among the industries seen benefiting from the newly-launched pilot free-trade zone (FTZ) in Shanghai, aviation-related businesses clustered around the city’s Pudong International Airport, one of China’s primary air gateways, stand a better chance of grabbing quick policy benefits.

This is because the Pudong Airport and its adjacent areas are now part of the new FTZ, which encompasses an area of 27.78 square kilometers, and as the FTZ implementation master plan gazetted by the Chinese State Council stipulates that technology-intensive and high-value added engineering and maintenance services should be given priority.

Indeed, a quasi-FTZ {綜合保稅區} has already been set up at the Pudong Airport four years ago to boost the emerging aviation economy there, with some FTZ features that could be boiled down to tariff exemptions, tax concessions, government dole-outs as well as simplified clearance and quarantine procedures, Shanghai-based China Business News reports.

Now with the integration into the bigger FTZ, analysts believe aviation-related enterprises based in the area, like Boeing Shanghai Aviation Service Co., Ltd. — a joint venture between Boeing, Shanghai International Airport (600009.CN) and China Eastern Airlines (00670.HK, CEA.US, 600115.CN) that concentrates on aircraft maintenance — can gain first-mover advantage.

A senior executive of Boeing Shanghai Aviation has particularly applauded further tariff reductions and waivers within the FTZ, as the company needs to import aircraft and engine parts and prevailing tariffs have been cutting into its profitability. Under the new arrangement, the entire FTZ will be regarded as a separate custom district and goods imported can enjoy zero tariffs, and, the company’s business activities there will also be exempted from the value-added taxes.

The initiative will boost the prospects for the aircraft repair and maintenance sector, the backbone of aviation industries, which is already on a good wicket amid rapid growth in aircraft fleets at major carriers. Information from the China Civil Aviation Administration suggests that the industry will be flying high by 2015 when a considerable portion of planes bought by the country’s airlines during the past decade will need to get comprehensive systems checks and overhauled if necessary, fueling a 45 billion yuan (US$7.35 billion) market.

The country’s only FTZ can give Shanghai the edge over other aviation hubs such as Beijing and Guangzhou.

– Contact the writer at [email protected]


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