Businessmen are happy about starting to see some detailed regulations regarding Shanghai's new pilot free trade zone, some of which will allow machinery imports to enter the zone duty-free. Analysts say the policies will not only aim at favoring manufacturers, however.

The new tax regulations say companies registered in the zone won't need to pay customs duty on production equipment, and that leasing companies in the zone will only need to pay a 5 percent tax on purchasing aircraft weighing more than 25 tons, while those outside have to pay at least 7 percent. The regulations are not earth-shaking, but are the first details issued since the zone opened a month ago.

Anders Paulsson, partner of Smith St. Solutions, said, "I don't know how long it was peculating inside the minds of the officials who created it, but it kind of came on the scene quite quickly. So in order to do that, this is our basis. And looking to reducing import tax on foreign machinery, that can upgrade the capabilities of Chinese companies. This can be very solid and strong first step, and it's a signal to the market that it's not just for show, we're here to make a difference."

Some note the duty-free import regulations may not be significant enough to attract companies, because there are many industrial parks in China with similar policies. One expert says, however, that the free trade zone has never been intended to have more companies, but rather to upgrade the services available to companies in the zone.

Zhang Huiming, professor of Fudan University, said, "When companies expand their production in the zone, they will also bring along the growth of their related service industries. The aim is to attract some manufacturers with really high production capabilities to come into the zone, where they will become an important support for the improvement of trading capabilities and financial capabilities."

The regulations also allow companies to display their products without paying tax in the zone, but they will pay sales taxes at the same rates companies outside do, for any deals done in the zone.

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