China's free trade zones are getting busier and busier! Located in China's major international trading cities, such as Shanghai, Shenzhen and Ningbo, their main raison d'etre has been to facilitate international trade. Though normally functioning under strict management and orderly conditions, the huge surge in China's overall levels of international trade in recent years and the subsequent policies changes introduced by the government have meant that the international free trade zones are now operating in circumstances of increasing disorder.
To avoid losses due to the recent export rebate changes and the new export tariff, steel exporters rushed to deliver their goods to the free trade zones before the relevant deadlines would take effect. Once the goods were successfully delivered to the free trade zones, they were treated as exported goods and as such could not be affected by any subsequent export policy changes.
From 2006 on, China adjusted its export rebates several times, targeting steel products in particular. Increasingly, there has been less and less of a buffering period between the issue date of new policy changes and the date of implementation. As a result, once rumors of new export policy changes spread in the market, significant quantities of steel products begin to be moved in the direction of the free trade zones. This is the time when, levels of activity and also of disorder begin to peak at all free trade zones across China. All types of trucks and ships brimful with goods jam the roads and waterways to the free trade zones and ports. The longest truck queues have even extended more than 20 kilometers in some free trade zones in eastern and southern China at such times. In Shanghai, before July 1 when the new export rebate started to take effect, some truck drivers even had to queue for three days in order to make it into the free trade zones before the deadline. Despite the long exhausting wait, they were the lucky ones, especially considering the huge numbers of trucks left outside the free trade zone after the deadline.
However, there are still further difficulties lying in wait for exporters who succeed in delivering their steel products or other goods into the free trade zones ahead of the deadlines. As the numerous goods jamming up the zones need further packing, unloading, reloading and so on, the related service suppliers come under huge pressure. Thus, service fees start to double or perhaps even see higher increases. Taking steel products as an example, unloading and loading fees are normally less than RMB 7 per ton, but during the times of heightened activity in question prices have even increased to more than RMB 20 per ton in some zones.
Exporters have thus suffered from unforeseen added costs. From now on, they will have to learn to live with this new situation, whether they like it or not.