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5 White Paper on the Business Environment in China
1.5 Shanghai Free Trade Zone
AT THE END of 2009, the Shanghai Free Trade Guangdong, were created — the strategy was, Wall Street
Zones Administration was established and since then, Journal observes, “start small in a manageable laboratory and
the organization has been overseeing three free trade zones expand once you’re sure the results won’t prove dangerous.” 10
in Shanghai’s east coast, including Waigaoqiao Free Trade
Zone, Yangshan Free Trade Port Area and Shanghai Pudong So what does Beijing want from a free trade zone?
Airport Free Trade Zone, covering 1,210.4 square kilometers According to the Framework Plan for the Shanghai Free
of land. is was the predecessor of the China (Shanghai) Trade Zone, the main goals are to “expedite the functional
Pilot Free Trade Zone. Two years later, in 2011, the Shanghai transformation of government, explore administrative
government applied to build a free trade zone inside the innovation, stimulate trading and investment facilitation, and
Shanghai Free Trade Zones. In March 2013, Premier Li had accumulate experience on achieving a more open Chinese
visited the Waigaoqiao free trade zone, and encouraged the economy.” In short, main goals seem to include opening up
setting up of a free trade pilot zone in Shanghai. By May, the the service sector and allowing more opportunities for foreign
plan was o cially sent to the central government to approve. investment.9 Shanghai Party chief Han Zheng told Caixin
that the Shanghai Free Trade Zone’s crucial reform has been
e plan was rst announced on July 3rd that year by the “to transform the government’s role, “ adding that “the most
State Council who had approved the plan and was personally important task now involves reforming the administrative
endorsed by Premier Li Keqiang who said he wanted to make review system.”9
the zone a snapshot of how China can upgrade its economic
structure.1 Xinhua quotes Han Zheng, Shanghai branch secretary
of China’s Communist Party, as stating that the success of
e Shanghai FTZ opened to great fanfare and high the SFTZ is its replicability – the mechanisms which can be
expectations on September 29, 2013. Backed by Premier copied and promoted on a national scale. Mr. Han said: “
Li, the Shanghai FTZ was intended “to provide a space for
the government to experiment with reforms and provide e FTZ is a testing ground for all of China, not our private
companies with more freedoms in investment and how they plot. New measures here should be applicable elsewhere.”
conduct business.” According to the American Chamber of He declared that these new measures re ect China’s intent to
Commerce in Shanghai, American businesses in China were continue opening up and deepen reform, saying, “It is not
“initially very optimistic about the FTZ and the prospects for just for local development.” He also added that a “power list”
potential market access openings, nancial sector deregulation within the next two or three years to “increase transparency”
and improvements in trade facilitation.” 2 is being considered.17
As of September 15, 2014, some 12,226 companies have What do the features of the SFTZ mean for foreign
registered in the SFTZ, including approximately 1,677 for- investors? Forbes enumerates:
eign rms, many from Hong Kong and Macau. Despite this,
however, experts state that only 10 percent are engaged in any e full convertibility of the yuan. ough the State
taxable activity.2 Newly registered foreign businesses, exclud- Administration of Foreign Exchange announced
ing those from Hong Kong, account for only about 5 % of in January 2011 that the currency would be fully
the total at the SFTZ. Foreign trade in the Shanghai FTZ convertible by 2016, the SFTZ “not only accelerates
reached 747.5 billion yuan (US$121.7 billion) in its rst year the timetable but helps put it in action on the global
of operation.11 market.” 13
e Shanghai FTZ marked the rst time that the Chinese Foreign companies are already allowed to invest freely
government followed a “Negative List” approach in supervis- in banks—with reduced transaction costs for rms to
ing investments. In the zone, foreign investors may participate create more e cient trading.13
in any activities or investments that are not on the negative
list to the same extent as Chinese domestic investors. Previ- Even before the free-trade zone opened, the value of
ously, China had delineated areas for foreign investment and real estate skyrocketed in the surrounding areas; there
Chinese regulators acted as “gatekeepers.”2 are no more limits on the foreign percentage of joint
construction projects with Chinese developers within
e concept is hardly new. Trade zones have been around the SFTZ.13
since the early days of Deng Xiaoping’s reforms, when
China’s rst special economic zones, notably in Shenzhen,
56
1.5 Shanghai Free Trade Zone
AT THE END of 2009, the Shanghai Free Trade Guangdong, were created — the strategy was, Wall Street
Zones Administration was established and since then, Journal observes, “start small in a manageable laboratory and
the organization has been overseeing three free trade zones expand once you’re sure the results won’t prove dangerous.” 10
in Shanghai’s east coast, including Waigaoqiao Free Trade
Zone, Yangshan Free Trade Port Area and Shanghai Pudong So what does Beijing want from a free trade zone?
Airport Free Trade Zone, covering 1,210.4 square kilometers According to the Framework Plan for the Shanghai Free
of land. is was the predecessor of the China (Shanghai) Trade Zone, the main goals are to “expedite the functional
Pilot Free Trade Zone. Two years later, in 2011, the Shanghai transformation of government, explore administrative
government applied to build a free trade zone inside the innovation, stimulate trading and investment facilitation, and
Shanghai Free Trade Zones. In March 2013, Premier Li had accumulate experience on achieving a more open Chinese
visited the Waigaoqiao free trade zone, and encouraged the economy.” In short, main goals seem to include opening up
setting up of a free trade pilot zone in Shanghai. By May, the the service sector and allowing more opportunities for foreign
plan was o cially sent to the central government to approve. investment.9 Shanghai Party chief Han Zheng told Caixin
that the Shanghai Free Trade Zone’s crucial reform has been
e plan was rst announced on July 3rd that year by the “to transform the government’s role, “ adding that “the most
State Council who had approved the plan and was personally important task now involves reforming the administrative
endorsed by Premier Li Keqiang who said he wanted to make review system.”9
the zone a snapshot of how China can upgrade its economic
structure.1 Xinhua quotes Han Zheng, Shanghai branch secretary
of China’s Communist Party, as stating that the success of
e Shanghai FTZ opened to great fanfare and high the SFTZ is its replicability – the mechanisms which can be
expectations on September 29, 2013. Backed by Premier copied and promoted on a national scale. Mr. Han said: “
Li, the Shanghai FTZ was intended “to provide a space for
the government to experiment with reforms and provide e FTZ is a testing ground for all of China, not our private
companies with more freedoms in investment and how they plot. New measures here should be applicable elsewhere.”
conduct business.” According to the American Chamber of He declared that these new measures re ect China’s intent to
Commerce in Shanghai, American businesses in China were continue opening up and deepen reform, saying, “It is not
“initially very optimistic about the FTZ and the prospects for just for local development.” He also added that a “power list”
potential market access openings, nancial sector deregulation within the next two or three years to “increase transparency”
and improvements in trade facilitation.” 2 is being considered.17
As of September 15, 2014, some 12,226 companies have What do the features of the SFTZ mean for foreign
registered in the SFTZ, including approximately 1,677 for- investors? Forbes enumerates:
eign rms, many from Hong Kong and Macau. Despite this,
however, experts state that only 10 percent are engaged in any e full convertibility of the yuan. ough the State
taxable activity.2 Newly registered foreign businesses, exclud- Administration of Foreign Exchange announced
ing those from Hong Kong, account for only about 5 % of in January 2011 that the currency would be fully
the total at the SFTZ. Foreign trade in the Shanghai FTZ convertible by 2016, the SFTZ “not only accelerates
reached 747.5 billion yuan (US$121.7 billion) in its rst year the timetable but helps put it in action on the global
of operation.11 market.” 13
e Shanghai FTZ marked the rst time that the Chinese Foreign companies are already allowed to invest freely
government followed a “Negative List” approach in supervis- in banks—with reduced transaction costs for rms to
ing investments. In the zone, foreign investors may participate create more e cient trading.13
in any activities or investments that are not on the negative
list to the same extent as Chinese domestic investors. Previ- Even before the free-trade zone opened, the value of
ously, China had delineated areas for foreign investment and real estate skyrocketed in the surrounding areas; there
Chinese regulators acted as “gatekeepers.”2 are no more limits on the foreign percentage of joint
construction projects with Chinese developers within
e concept is hardly new. Trade zones have been around the SFTZ.13
since the early days of Deng Xiaoping’s reforms, when
China’s rst special economic zones, notably in Shenzhen,
56
