Shanghai is to become the second region on the mainland to allow duty-free shopping for individuals traveling domestically, part of the city's efforts to become an international trade center, according to a guideline that takes effect on January 1.

"The city will explore tax rebates on departure in coordination with national-level administrations and select locations to set up duty-free shops," the guideline says.

China's southernmost Hainan Province piloted the plan on January [Hong Kong company registration]1, 2011, with visitors and local residents able to buy tax-free commodities from designated stores before flying to other destinations on the mainland.

The plan received a warm welcome initially, but its popularity has been declining because the products offered prove unattractive to travelers and there are also too few shops in the region, Xinhua news agency said.

Introducing tax rebates on departure in Shanghai will develop a sound shopping atmosphere that is crucial to the city's mission to become an international trade center, said Shanghai Vice Mayor Zhao Wen as she proposed the plan during a political advisory meeting in Beijing.

Shanghai currently has duty-free shops at airports and one in Jing'an District that allows individuals to buy duty-free products within 6 months of their last return from overseas.

The proposed new duty-free shops will extend tax benefits to travelers without the need to leave the country.[Set Up Company Hong Kong]

"The guideline specifies responsibilities of various government departments and sets a clearer path for Shanghai to become an international trade center on par with China's status in global trading," said Ai Baojun, another vice mayor.

The guideline urges government departments to encourage the establishment of trade companies, improve the layout and infrastructure of commercial and logistics facilities, simplify trade-related procedures, and maintain a healthy market and legal environment.

Other detailed measures will include offering preferential policies in terms of labor, capital and clearing for trade headquarters, providing greater support for local trade firms involved in international disputes, cutting paperwork for customs clearance, developing an exhibition industry, reducing administrative approval for trading projects, and promoting e-commerce and trade in services.

Authorities should specify the definition of trade headquarters and detail preferential policies, the Standing Committee of the Shanghai People's Congress said. Guidelines on the exhibition industry should also be updated, said Yang Dinghua, its vice chairwoman.[Offshore Company Incorporation]

In 2009, the central government announced its plan to build Shanghai into an international trade center by the year 2020.