The set-up of the Shanghai aviation hub has been over 10 years, but the competitiveness power has been unsatisfied as a hub. Some in aviation industry pointed out that Shanghai is selected as the free trade zone, maybe, we can take Shanghai as a ‘reform plot’ for Chinese civil aviation which can be copied by the whole aviation industry. The journalist from CAAC News visited the Shanghai Airports Group and understood how the aviation industry connects with the construction of the Shanghai Pilot Free Trade Zone, and how the construction of free trade zone force civil aviation to be changed.

A Rich Competitive Free Trade Zone Shall Be Indispensable to the Sophisticated Aviation Hub

In 98 key tasks listed by ‘Master Plan to China (Shanghai) Pilot Free Trade Zone’, there are nearly 20 tasks relevant to the aviation transportation and airports, including to increase the international airlines for the cargo transit in Pudong Airport, to promote construction of the aviation hub through transformation of the supervision models, to explore the operational model of the marine and aero linkage, and to encourage development of the high-value services and businesses, such as aircraft leasing, high-technology and maintenance.

Above mentioned accords with the development law. The journalist learned that the free trade parks supported by aviation transportation industry have already become the main power to robust the economy of the cities, even the whole countries, for example, Incheon International Airport and Incheon Free Economic Zone in South Korea, Dubai International Airport and Free Trade Zone, in Hong Kong and Singapore are successful free trade zone which relies on the local marine and aero logistics network with high efficiency supported by local airports or marine ports to be developed.

In 1996, the Dubai Airport was established. The volume of the passengers increased by 1.39-fold after 9 years, and the freight volume grew 1.68-fold, which is higher than the global growth. Cargo and mail transportation handling volume in Al Maktoum Airport which locates in Dubai World Center had been less than 10,000 tons in 2011 while it starts to be operated, but it reached to 220,000 tons in 2012. The local demand in Dubai is insufficient because it is located in the hinterland. However, it relies on the policy to promote transit and growth of the passengers and freight volume. At present, there are over 1600 enterprises settled in.

Therefore, a competitive free trade zone needs sophisticated aviation hubs as support. The relationship between them shall interact and help each other forward.

The free trade zone will bring the development opportunities for Shanghai to be an important aero-hub

The free trade zone is helpful to promote the growth of the passengers and freight handling volume and promote the construction of Shanghai aviation hub. Zhao Wei, director of Airport Management of Civil Aviation Management Institute of China, pointed out ‘people, logistics and capital outflow can be enhanced remarkably by free trade zone, and the status of Pudong Airport as a cargo hub can be enhanced by more aviation supply resources. ’

The journalist learned that the services industry and high-tech manufacturing industry around the airport will build up the supporting industries, for example, Shanghai international tourism holiday resorts will be done in 2015, which is just 12 kilometers apart from it. The production capacity of COMAC’s assembly factory (Commercial Aircraft Corporation of China Ltd) will be initially formed in 2016. Moreover, the Disney Land will be put into operations in 2016, which will increase the passengers and freight handling volume.

Lee Derun, CEO of Shanghai Airport Group, pointed out ‘based on the favorable development, the free trade zone will bring the good opportunities to develop the MRO, aircraft maintenance and aircraft leasing for Shanghai airports’.

Shanghai aviation hub in the transforming period

Shanghai aviation hub has already been equipped the world-class hardware facilities after 10-year development, but it has to be admitted that the soft power is still weak, and the service level in the air harbors and operational efficiency face to the improvement pressure. The growth of the airlines frequency and transit in free trade zone will test the whole service level in Shanghai air harbors; Meanwhile, the regulatory model innovation and international passengers and freight volume growth put forward a new demand for the streamlined customs clearance and efficiency.

Lee Derun said, ‘the open-up to the world forcing reform in Shanghai gives Shanghai airports a transition opportunity, which already passed the naturally rapid growth. ’ thus, Shanghai Airports Group will perfect 3 areas to connect with free trade zone, including the facilities expansion, software services upgrade and the regional functions perfection.

The journalist learned that the build-up of the fourth runway has been already done in Pudong Airport, and will be put into operations in the next year. The re-construction for the process, the luggage and equipment system in Terminal 1 tailors for Eastern Airlines; Meanwhile, the expansion projects such as satellite offices in the south and aprons for special airplanes are now shooting for a full feasibility study. Lee Derun introduced that Pudong Airport will be guarantee 80 million passengers handling volume.

Someone working on the Strategic Department in Shanghai Airports Group introduced that Pudong Airport will start the its center functions with cargo consolidation and transshipment, as well as aerodrome functions with cargo consolidation in FCL. Based on the master deployment of Shanghai Free Trade Zone, the local will explore the land-and-water coordinated transport to promote the local distribution in Asia-Pacific region.

It is not contingent to select Shanghai as the pilot free trade zone

Compare with the bonded zones, the policies in the free trade zone are more completed and they are wider. There are 4 missions the free trade zone shall achieve, including financial globalization, investment liberalization, trade liberalization and administrative streamlining. International situation needs Shanghai free trade zone to be efficient, so the transformation of government functions and the break-up the bottle neck which restricts the development of civil aviation loom ahead.

Based on the research from Shanghai Airport Group, the main points the civil aviation shall reform as followings, deregulation in investment, route access and aircraft purchase, management system perfection in the freedom traffic rights adjustment, airspace, cargo hub center operations etc.

Pudong International Airport, as the Shanghai aviation hub, needs more priorities on new-opened and encrypted airlines to meet the increasing demands. The qualification examinations and approval for the international express center shall be simplified; the second safely inspection for the international and domestic passengers and luggage and the trans-shipment cargo shall be exempted; the industries related to the aviation including bonded MRO, aircraft leasing, jet exhibition and so on; to optimize the visa policy, and loosen the policy and time for the exemption visa; to permit the passengers with exemption visa by air to enter or/ and exit Shanghai from free trade zone in short term.

The challenge and the chance co-exists. According to the reports, it is expected that the aviation manufacturing industry, service industry, logistics, trade and tourism will get together around Pudong Airport. Shanghai Airport Group is planning to build up the aero-metropolis with functions of transportation, logistics, finance, business and entertainment etc.

Shanghai is a pilot city, and it is no doubt it is a sample for the whole China.

Commence: the policy for the free trade zone will promote to build up Shanghai as composite aero-metropolis

During the course of two to three years of piloting reforms, the China (Shanghai) Pilot Free Trade Zone shall expedite the functional transformation of government, expand the opening up of service sectors and promote the reform of the foreign investment administrative system, and develop headquarter economy and new trade forms; shall explore RMB convertibility under capital account items and opening up of financial services; shall explore to improve Customs' supervision efficiency; and shall create a framework to support investment and innovation activities to cultivate an internationalized business environment. The China (Shanghai) Pilot Free Trade Zone shall pilot a free trade zone, as measured by international standards, with convenient investment and trading procedure, full convertibility of currencies, effective and efficient goods supervision, and investor-friendly regulatory environment. As such, experience hence gained shall serve nationwide with the new ideas and approaches for opening up of the economy and deepen the reform further.

Free trade zone is expected as a free port with zero tariff to the trade and shopping, and 72-hour exemption visa policy. Shanghai will be more attractive to the domestic and international transfer passengers, which contributes to increase the flow of passengers, and builds it as the international hub.

The build-up of free trade zone will abstract more processing and manufacturing Industry, trade and warehousing and logistics getting together. Chinese industrial upgrading, tax exemptions and free ports will abstract high-tech manufacturing industry, which consolidate the status of Pudong International Airport as an aero hub. Owning to the Shanghai’s location, the free trade zone will build up Shanghai as the real platform of logistics in connection with Northeast Asia.

With development of Pudong International Airport, on July 2009, the State Council approved to establish the bonded zone in Pudong International Airport, which means Pudong International Airport starts the development of aero-metropolis. The Shanghai Pilot Free Trade Zone will quicken the build-up steps of Pudong Aero-Metropolis.

The policy open-up will increase the passengers and cargo throughout. Along with the growth of passengers in Pudong International Airport, Pudong International Airport will build up the ‘new engine’ driving the economic development in Shanghai with high-tech, e-commerce and international trade.

Free trade zone will promote construction of the international hub, and gradually recognize the development of airport cycle economy with high-end, extraversion and innovation. In addition, the huge visitors for visiting Disney Land and the policy support for the trade, finance and investment will build up Pudong International Airport as the integrated aero-metropolis with aviation, business, restaurants, entertainment and real estate, and leasing.

Relevant Links:

The China (Shanghai) Pilot Free Trade Zone is comprised of the four customs supervision areas, including Shanghai Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistics Zone, Yangshan Bonded Port and Shanghai Pudong Airport Free Trade Zone, covering 28.78 km2 and based on the ongoing results of the implementation , as well as to develop industry and the need to spur the radiating effect, the scope of implementation and the scope of the pilot measures will be progressively expanded, forming a supporting mechanism for building Shanghai as an international economic, finance, trade and transportation center. Pudong Airport Free Trade Zone covers 3.59km2.

Based on the unity of openness expansion and system reform, and the unity of functional development and policy innovation, the China (Shanghai) Pilot Free Trade Zone aims to develop a framework in line with international norms for investment and trade. To do so, one needs to bear in mind the strategic requirements of going to the world and serving the nation, as well as the strategic task of building "The Four Centers” of Shanghai, and take actions to experiment step by step with risks under control.

Accelerate the functional transformation of government.

1.       Opening up of investment sectors

2.       Promote the transformation of trade development approach

3.       Deepen innovation and opening up of financial services

4.       Improve regulatory supporting systems

Pudong Airport is a fast-growing hub for both passenger and cargo traffic. With 3,227,914 metric tonnes handled in 2010, the airport is the world's third busiest airport by cargo traffic. Pudong Airport also served a total of 40,578,621 passengers in 2010, making it the third busiest airport in mainland China and the 20th busiest in the world. As of December 2011, Pudong Airport hosted 87 airlines serving 194 destinations.

Shanghai Pudong is the busiest international hub of mainland China, ranking 22nd globally in terms of international traffic. About half of its total passenger traffic is international.

The airport transportation system is well-development, including 5 main roads and maglev train, as well as the subway Line 2 linking to the city.

More information, please see: http://en.shftz.gov.cn/Negative%20List.pdf