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6 White Paper on the Business Environment in China
Port Area and Shanghai Pudong Airport Free Trade Zone, more opportunities for foreign investment.9 Shanghai Party
covering 1,210.4 square kilometers of land. This was the pre- chief Han Zheng told Caixin that the Shanghai Free Trade
decessor of the China (Shanghai) Pilot Free Trade Zone. Two Zone’s crucial reform has been “to transform the government’s
years later, in 2011, the Shanghai government applied to build role”, adding that “the most important task now involves
a free trade zone inside the Shanghai Free Trade Zones. In reforming the administrative review system.”9
March 2013, Premier Li had visited the Waigaoqiao free trade
zone, and encouraged the setting up of a free trade pilot zone Xinhua quotes Han Zheng, Shanghai branch secretary of
in Shanghai. By May, the plan was officially sent to the central China’s Communist Party, as stating that the success of the
government to approve. The plan was first announced on July SFTZ is its replicability – the mechanisms which can be copied
3rd that year by the State Council who had approved the plan and promoted on a national scale. Mr. Han said: “ The FTZ
and was personally endorsed by Premier Li Keqiang who said he is a testing ground for all of China, not our private plot. New
wanted to make the zone a snapshot of how China can upgrade measures here should be applicable elsewhere.” He declared that
its economic structure.1 these new measures reflect China’s intent to continue opening
up and deepen reform, saying, “It is not just for local develop-
The Shanghai FTZ opened to great fanfare and high ex- ment.” He also added that a “power list” within the next two
pectations on September 29, 2013. Backed by Premier Li, the or three years to “increase transparency” is being considered.17
Shanghai FTZ was intended “to provide a space for the govern-
ment to experiment with reforms and provide companies with What do the features of the SFTZ mean for foreign
more freedoms in investment and how they conduct business.” investors? Forbes enumerates:
According to the American Chamber of Commerce in Shang-
hai, American businesses in China were “initially very optimis- • The full convertibility of the yuan. Though the State
tic about the FTZ and the prospects for potential market access Administration of Foreign Exchange announced in
openings, financial sector deregulation and improvements in January 2011 that the currency would be fully convert-
trade facilitation.” 2 ible by 2016, the SFTZ “not only accelerates the time-
table but helps put it in action on the global market.” 13
As of September 15, 2014, some 12,226 companies have
registered in the SFTZ, including approximately 1,677 foreign • Foreign companies are already allowed to invest freely
firms, many from Hong Kong and Macau. Despite this, howev- in banks—with reduced transaction costs for firms to
er, experts state that only 10 percent are engaged in any taxable create more efficient trading. 13
activity.2 Newly registered foreign businesses, excluding those
from Hong Kong, account for only about 5 % of the total at • Even before the free-trade zone opened, the value of
the SFTZ. Foreign trade in the Shanghai FTZ reached 747.5 real estate skyrocketed in the surrounding areas; there
billion yuan (US$121.7 billion) in its first year of operation.11 are no more limits on the foreign percentage of joint
construction projects with Chinese developers within
The Shanghai FTZ marked the first time that the Chinese the SFTZ.13
government followed a “Negative List” approach in supervis-
ing investments. In the zone, foreign investors may participate • China has started trading gold internationally within
in any activities or investments that are not on the negative list the SFTZ starting in the final quarter of 2014. The
to the same extent as Chinese domestic investors. Previously, newly lifted restrictions are already having an effect;
China had delineated areas for foreign investment and Chinese Singapore is introducing a physical gold contract with
regulators acted as “gatekeepers.”2 China. 13
The concept is hardly new. Trade zones have been around Launched a day ahead of the October 1 National Day hol-
since the early days of Deng Xiaoping’s reforms, when China’s iday in 2013, the SFTZ had earlier been tipped to be the test-
first special economic zones, notably in Shenzhen, Guangdong, ing ground for liberalizing interest rates, now subject to central
were created — the strategy was, Wall Street Journal observes, bank guidelines, and contribute to the longer-term goal of
“start small in a manageable laboratory and expand once you’re opening the capital account, which covers investments. How-
sure the results won’t prove dangerous.” 10 ever, the Wall Street Journal was quick to point out that these
reforms got no specific mention on opening day. According
So what does Beijing want from a free trade zone? According to an official statement, financial experiments would proceed
to the Framework Plan for the Shanghai Free Trade Zone, the “as conditions allowed” and “risks would be controlled”. Rules
main goals are to “expedite the functional transformation of would be put in place over a three-year period. The opening
government, explore administrative innovation, stimulate day’s no-show by Premier Li, a key supporter of the SFTZ, sent
trading and investment facilitation, and accumulate experience “a message of top-level uncertainty” about the SFTZ. 10
on achieving a more open Chinese economy.” In short, main
goals seem to include opening up the service sector and allowing A “negative list” running to 10 pages with more than 200
restrictions was later announced. Those included limits on in-
64
Port Area and Shanghai Pudong Airport Free Trade Zone, more opportunities for foreign investment.9 Shanghai Party
covering 1,210.4 square kilometers of land. This was the pre- chief Han Zheng told Caixin that the Shanghai Free Trade
decessor of the China (Shanghai) Pilot Free Trade Zone. Two Zone’s crucial reform has been “to transform the government’s
years later, in 2011, the Shanghai government applied to build role”, adding that “the most important task now involves
a free trade zone inside the Shanghai Free Trade Zones. In reforming the administrative review system.”9
March 2013, Premier Li had visited the Waigaoqiao free trade
zone, and encouraged the setting up of a free trade pilot zone Xinhua quotes Han Zheng, Shanghai branch secretary of
in Shanghai. By May, the plan was officially sent to the central China’s Communist Party, as stating that the success of the
government to approve. The plan was first announced on July SFTZ is its replicability – the mechanisms which can be copied
3rd that year by the State Council who had approved the plan and promoted on a national scale. Mr. Han said: “ The FTZ
and was personally endorsed by Premier Li Keqiang who said he is a testing ground for all of China, not our private plot. New
wanted to make the zone a snapshot of how China can upgrade measures here should be applicable elsewhere.” He declared that
its economic structure.1 these new measures reflect China’s intent to continue opening
up and deepen reform, saying, “It is not just for local develop-
The Shanghai FTZ opened to great fanfare and high ex- ment.” He also added that a “power list” within the next two
pectations on September 29, 2013. Backed by Premier Li, the or three years to “increase transparency” is being considered.17
Shanghai FTZ was intended “to provide a space for the govern-
ment to experiment with reforms and provide companies with What do the features of the SFTZ mean for foreign
more freedoms in investment and how they conduct business.” investors? Forbes enumerates:
According to the American Chamber of Commerce in Shang-
hai, American businesses in China were “initially very optimis- • The full convertibility of the yuan. Though the State
tic about the FTZ and the prospects for potential market access Administration of Foreign Exchange announced in
openings, financial sector deregulation and improvements in January 2011 that the currency would be fully convert-
trade facilitation.” 2 ible by 2016, the SFTZ “not only accelerates the time-
table but helps put it in action on the global market.” 13
As of September 15, 2014, some 12,226 companies have
registered in the SFTZ, including approximately 1,677 foreign • Foreign companies are already allowed to invest freely
firms, many from Hong Kong and Macau. Despite this, howev- in banks—with reduced transaction costs for firms to
er, experts state that only 10 percent are engaged in any taxable create more efficient trading. 13
activity.2 Newly registered foreign businesses, excluding those
from Hong Kong, account for only about 5 % of the total at • Even before the free-trade zone opened, the value of
the SFTZ. Foreign trade in the Shanghai FTZ reached 747.5 real estate skyrocketed in the surrounding areas; there
billion yuan (US$121.7 billion) in its first year of operation.11 are no more limits on the foreign percentage of joint
construction projects with Chinese developers within
The Shanghai FTZ marked the first time that the Chinese the SFTZ.13
government followed a “Negative List” approach in supervis-
ing investments. In the zone, foreign investors may participate • China has started trading gold internationally within
in any activities or investments that are not on the negative list the SFTZ starting in the final quarter of 2014. The
to the same extent as Chinese domestic investors. Previously, newly lifted restrictions are already having an effect;
China had delineated areas for foreign investment and Chinese Singapore is introducing a physical gold contract with
regulators acted as “gatekeepers.”2 China. 13
The concept is hardly new. Trade zones have been around Launched a day ahead of the October 1 National Day hol-
since the early days of Deng Xiaoping’s reforms, when China’s iday in 2013, the SFTZ had earlier been tipped to be the test-
first special economic zones, notably in Shenzhen, Guangdong, ing ground for liberalizing interest rates, now subject to central
were created — the strategy was, Wall Street Journal observes, bank guidelines, and contribute to the longer-term goal of
“start small in a manageable laboratory and expand once you’re opening the capital account, which covers investments. How-
sure the results won’t prove dangerous.” 10 ever, the Wall Street Journal was quick to point out that these
reforms got no specific mention on opening day. According
So what does Beijing want from a free trade zone? According to an official statement, financial experiments would proceed
to the Framework Plan for the Shanghai Free Trade Zone, the “as conditions allowed” and “risks would be controlled”. Rules
main goals are to “expedite the functional transformation of would be put in place over a three-year period. The opening
government, explore administrative innovation, stimulate day’s no-show by Premier Li, a key supporter of the SFTZ, sent
trading and investment facilitation, and accumulate experience “a message of top-level uncertainty” about the SFTZ. 10
on achieving a more open Chinese economy.” In short, main
goals seem to include opening up the service sector and allowing A “negative list” running to 10 pages with more than 200
restrictions was later announced. Those included limits on in-
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