Europe
Exclusive: Free Zones in Germany and China: One Is Shutting Down, the Other Is Expanding
A German free zone still sits inside EU customs territory under the Union Customs Code...
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A German free zone still sits inside EU customs territory under the Union Customs Code...
FTZ News: Germany has spent the past fifteen years shutting free zones down. China has spent the same stretch opening them up.
Germany is down to one coastal free port. Hamburg’s Freihafen, once the largest free port anywhere, lost the status in 2013. Emden and Kiel went in 2010. Bremen dropped its free-port label in 2009. Cuxhaven’s zone is set to close on January 1, 2027, after the Bundestag passed a law last November at the request of the operator itself. That leaves Bremerhaven as the last free port in the country. A smaller inland free zone in Duisburg has been running since 1991 and is not part of the coastal free-port system.
China’s expansion
China went from one zone to 23 over roughly the same period. Shanghai’s Pilot Free Trade Zone opened in September 2013, the same year Germany was already cutting zones elsewhere. The network has expanded in seven waves since. The most recent addition is a zone in Inner Mongolia that the State Council approved this April. Beijing added six zones in a single batch in 2019.
Different rules
A German free zone still sits inside EU customs territory under the Union Customs Code. Goods inside keep non-EU status for duty purposes until they are released into the market. Chinese zones work on a different idea — officials call it “within the territory, but outside the customs line.” They were built as places to test looser rules on foreign investment, capital flows and customs before deciding what to roll out nationally. Germany’s zones were designed for a trading world that no longer exists.
What the numbers show
Cuxhaven’s operator said the zone simply did not have enough dutiable cargo left to keep the customs fence running. Most of what moves through the port now is wind-turbine equipment built and shipped inside the EU, goods that were never going to face a tariff. China’s 22 pilot zones (the count before Inner Mongolia) handled 8.59 trillion yuan in trade in 2024, roughly $1.2 trillion, or about one-fifth of the country’s entire foreign trade in a small slice of land. Foreign direct investment through those zones reached $28.25 billion that year, around a quarter of all FDI into China.
Shanghai’s zone alone moved more than 1.1 trillion yuan in trade in the first half of 2025 — a quarter of the national FTZ total by itself. Zhejiang’s zone covers a quarter of one percent of the province’s land but accounts for nearly a fifth of its trade. Xinjiang’s zone, opened in November 2023, pushed the region’s trade past 400 billion yuan for the first time within two years.
Tax and policy
Only four Chinese zones — Shanghai’s Lingang area, Shenzhen’s Qianhai, Guangzhou’s Nansha, and the separately run Hainan Free Trade Port — offer a flat 15 percent corporate rate, and only for companies in certain industries. The other zones rely more on looser procedures and rules than on a direct tax cut. German zones never offered a tax break. Their original purpose, going back to the 19th century, was simply to defer customs duty on goods in transit.
Beijing has also used the zones to cut the national list of industries closed to foreign investment, from 93 items in 2017 to 29 this year. The more the European single market works as designed, the less reason there is for a customs enclave in Germany.
China is still deciding how much of its economy to open and is using new zones to manage that process region by region. In Germany, free ports no longer have much cargo left that needs the old customs treatment./.
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