Three new free trade zones (FTZs) were unveiled on April 20th, reflecting China’s new economic and opening-up reforms. Tianjin, Guangzhou and Fujian have joined Shanghai and are destined to become the latest hot destinations for multinational corporations and local Chinese companies seeking to benefit from more relaxed financial and investment controls.
With the long-standing cost advantage in foreign trade dwindling, China is seeking a new policy regime to maintain or even accelerate growth through further opening up and liberalisation of its financial system. The pilot Shanghai Free Trade Zone (SFTZ) has been a test-bed for financial innovation, new trade, legal and regulatory policies and more liberal rules for foreign investment.
According to the Ministry of Commerce, the waiting time for import customs clearance in Shanghai Free Trade Zone (SFTZ) is over 40% shorter than in the rest of the country. According to media reports, after the SFTZ came into operation, two-way RMB flows arising from cross-border sweeping reached more than 27.2 billion between January and August last year.
Unveiling the three new FTZs in late April, the Ministry of Commerce and the State Council also released a set of ‘management measures’, with revisions on entry, registration and compliance, all of which could affect corporate treasurers.
The government announced the latest “negative list”, with areas with restrictions for foreign investors, effective May 1st and applicable to SFTZ and the new FTZs. Companies operating in the sectors or areas that are not on the “negative list” will be subject to the same rules as the domestic companies. The list has 17 fewer items than the one from 2014 for SFTZ, due to removal of 53 items from the old list and addition of 17.
The State Council has also removed 12 administrative approval requirements for foreign companies, Sino-foreign joint ventures and Taiwanese investors in the FTZs. Foreign companies seeking to set up a company in one of the zones will no longer need to obtain pre-approval and instead will need to report to the relevant authorities for record-filing purposes.
Finally, an online filing system will be established to ensure transparency among administrative departments and to avoid duplication of paperwork for companies in the FTZs.
The Guangdong FTZ includes the Nansha New Area in Guangzhou, Shenzhen Qianhai and Zhuhai Hengqin New Area, covering a total of 116.2 sq km. The Tianjin FTZ, with a total area of 119.9 sq km, is comprised of Tianjin Port, Tianjin Airport and the Binhai New Area industrial park. The 118.04-square-meter Fujian FTZ includes industrial areas in the provincial capital of Fuzhou, the whole of Xiamen and Pingtan, a new industrial park targeting investment from Taiwan.
At the same time, the government has expanded the area of the SFTZ from 28.78 sq km to more than 120 sq km, to cover the Lujiazui finance trade zone, dubbed "China's Wall Street". It will allow Shanghai to give full play to the advantages of the Pudong New Area and to test foreign investment reform on a larger scale, officials commented. (End)
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