The State Council approved to set up the first inland duty-free zone in Chongqing Municipality, said Bo Xilai, Secretary of the Chongqing Municipal Committee of the Communist Party of China, on the sidelines of the Third Session of the 11th National People's Congress (NPC) held on March 5-14. The duty-free zone will cover 10 square km.

In Chongqing's duty-free zone, foreign merchandise can be brought in without import duties for further processing or re-exporting. Import duties must be paid on these goods if they are released into the local market.

Bo said Chongqing's economic strength is undermined by its geographic location—in the vast western part of China. The inland municipality is essentially a mountainous city surrounded by steep hills on all sides.

Shanghai is the economic powerhouse in the lower reach of the Yangtze River. Bo said the Central Government's decision to set up the duty-free zone in Chongqing has in effect set in motion a major strategy to make Chongqing the economic center in the upper reach of the Yangtze River.

Bo said further opening to foreign trade is a necessary path to achieve this goal. Chongqing's GDP lags far behind the other three municipalities--Beijing, Shanghai and Tianjin.