Page 84 - 2017 White Paper
P. 84
7 White Paper on the Business Environment in China
The State Council statement said the country will use The Shanghai FTZ opened to great fanfare and high
the FTZs to test a “negative list” approach, which specifies expectations on September 29, 2013. Backed by Premier
investment sectors off-limits to foreign investors. The Li, the Shanghai FTZ was intended “to provide a space for
approach will allow foreign investors access to the same the government to experiment with reforms and provide
regulation rules for new investment as domestic firms, as companies with more freedoms in investment and how
long as the business is not on the“negative list”. Under the they conduct business”. According to the American
“negative list”, FTZ foreign investments will be prohibited Chamber of Commerce in Shanghai, American businesses
in sectors such as non-ferrous metal mining, air traffic in China were “initially very optimistic about the FTZ and
control systems management, postal enterprises and the prospects for potential market access openings,
production of radio and television programs. Foreign financial sector deregulation and improvements in trade
investments are restricted to joint ventures with facilitation” (Baccam 2014).
domestic companies in sectors such as oil and natural gas
exploration and development, general-purpose airplane As of September 15, 2014, some 12,226 companies
design, manufacture and maintenance as well as rare have registered in the SFTZ, including approximately
earths smelting, according to the list (Xinhua 2015). 1,677 foreign firms, many from Hong Kong and Macau.
Despite this, however, experts state that only 10 percent
The list also maintained the existing 49 percent cap are engaged in any taxable activity (Baccam 2014). Newly
for foreign companies investing in securities business registered foreign businesses, excluding those from
joint ventures and restricted foreign investments in air Hong Kong, account for only about 5 % of the total at the
cargo operations, stating that air cargo operations had SFTZ. Foreign trade in the Shanghai FTZ reached 747.5
to be controlled by a Chinese party and a single foreign billion yuan (US$121.7 billion) in its first year of operation
investor could not hold more than 25 percent stake. (Areddy 2014).
The list, effective in May, will be applied to the four FTZs
(Xinhua 2015).Wang Shouwen said the new FTZ“negative The Shanghai FTZ marked the first time that the
list” detailed a total of 122 items, 17 less than a 2014 list Chinese government followed a “Negative List” approach
put in place for the Shanghai FTZ, an indication that there in supervising investments. In the zone, foreign investors
will be greater openness and transparency (Ibid.). may participate in any activities or investments that are
not on the negative list to the same extent as Chinese
Shanghai FTZ: Background domestic investors. Previously, China had delineated
areas for foreign investment and Chinese regulators
At the end of 2009, the Shanghai Free Trade Zones acted as “gatekeepers” (Baccam 2014).
Administration was established and since then, the
organization has been overseeing three free trade zones The concept is hardly new. Trade zones have been
in Shanghai’s east coast, including Waigaoqiao Free around since the early days of Deng Xiaoping’s reforms,
Trade Zone, Yangshan Free Trade Port Area and Shanghai when China’s first special economic zones, notably in
Pudong Airport Free Trade Zone, covering 1,210.4 square Shenzhen, Guangdong, were created — the strategy was,
kilometers of land. This was the predecessor of the China Wall Street Journal observes, “start small in a manageable
(Shanghai) Pilot Free Trade Zone. Two years later, in 2011, laboratory and expand once you’re sure the results won’t
the Shanghai government applied to build a free trade prove dangerous” (Kazer, Geng and Li 2013).
zone inside the Shanghai Free Trade Zones. In March
2013, Premier Li had visited the Waigaoqiao free trade So what does Beijing want from a free trade zone?
zone, and encouraged the setting up of a free trade pilot According to the Framework Plan for the Shanghai Free
zone in Shanghai. By May, the plan was officially sent to Trade Zone, the main goals are to“expedite the functional
the central government to approve. The plan was first transformation of government, explore administrative
announced on July 3rd that year by the State Council innovation, stimulate trading and investment facilitation,
who had approved the plan and was personally endorsed and accumulate experience on achieving a more
by Premier Li Keqiang who said he wanted to make the open Chinese economy”. In short, main goals seem to
zone a snapshot of how China can upgrade its economic include opening up the service sector and allowing
structure (CCTV.com 2013). more opportunities for foreign investment (Tiezzi 2013).
Shanghai Party chief Han Zheng told Caixin that the
84 Shanghai Free Trade Zone’s crucial reform has been “to
The State Council statement said the country will use The Shanghai FTZ opened to great fanfare and high
the FTZs to test a “negative list” approach, which specifies expectations on September 29, 2013. Backed by Premier
investment sectors off-limits to foreign investors. The Li, the Shanghai FTZ was intended “to provide a space for
approach will allow foreign investors access to the same the government to experiment with reforms and provide
regulation rules for new investment as domestic firms, as companies with more freedoms in investment and how
long as the business is not on the“negative list”. Under the they conduct business”. According to the American
“negative list”, FTZ foreign investments will be prohibited Chamber of Commerce in Shanghai, American businesses
in sectors such as non-ferrous metal mining, air traffic in China were “initially very optimistic about the FTZ and
control systems management, postal enterprises and the prospects for potential market access openings,
production of radio and television programs. Foreign financial sector deregulation and improvements in trade
investments are restricted to joint ventures with facilitation” (Baccam 2014).
domestic companies in sectors such as oil and natural gas
exploration and development, general-purpose airplane As of September 15, 2014, some 12,226 companies
design, manufacture and maintenance as well as rare have registered in the SFTZ, including approximately
earths smelting, according to the list (Xinhua 2015). 1,677 foreign firms, many from Hong Kong and Macau.
Despite this, however, experts state that only 10 percent
The list also maintained the existing 49 percent cap are engaged in any taxable activity (Baccam 2014). Newly
for foreign companies investing in securities business registered foreign businesses, excluding those from
joint ventures and restricted foreign investments in air Hong Kong, account for only about 5 % of the total at the
cargo operations, stating that air cargo operations had SFTZ. Foreign trade in the Shanghai FTZ reached 747.5
to be controlled by a Chinese party and a single foreign billion yuan (US$121.7 billion) in its first year of operation
investor could not hold more than 25 percent stake. (Areddy 2014).
The list, effective in May, will be applied to the four FTZs
(Xinhua 2015).Wang Shouwen said the new FTZ“negative The Shanghai FTZ marked the first time that the
list” detailed a total of 122 items, 17 less than a 2014 list Chinese government followed a “Negative List” approach
put in place for the Shanghai FTZ, an indication that there in supervising investments. In the zone, foreign investors
will be greater openness and transparency (Ibid.). may participate in any activities or investments that are
not on the negative list to the same extent as Chinese
Shanghai FTZ: Background domestic investors. Previously, China had delineated
areas for foreign investment and Chinese regulators
At the end of 2009, the Shanghai Free Trade Zones acted as “gatekeepers” (Baccam 2014).
Administration was established and since then, the
organization has been overseeing three free trade zones The concept is hardly new. Trade zones have been
in Shanghai’s east coast, including Waigaoqiao Free around since the early days of Deng Xiaoping’s reforms,
Trade Zone, Yangshan Free Trade Port Area and Shanghai when China’s first special economic zones, notably in
Pudong Airport Free Trade Zone, covering 1,210.4 square Shenzhen, Guangdong, were created — the strategy was,
kilometers of land. This was the predecessor of the China Wall Street Journal observes, “start small in a manageable
(Shanghai) Pilot Free Trade Zone. Two years later, in 2011, laboratory and expand once you’re sure the results won’t
the Shanghai government applied to build a free trade prove dangerous” (Kazer, Geng and Li 2013).
zone inside the Shanghai Free Trade Zones. In March
2013, Premier Li had visited the Waigaoqiao free trade So what does Beijing want from a free trade zone?
zone, and encouraged the setting up of a free trade pilot According to the Framework Plan for the Shanghai Free
zone in Shanghai. By May, the plan was officially sent to Trade Zone, the main goals are to“expedite the functional
the central government to approve. The plan was first transformation of government, explore administrative
announced on July 3rd that year by the State Council innovation, stimulate trading and investment facilitation,
who had approved the plan and was personally endorsed and accumulate experience on achieving a more
by Premier Li Keqiang who said he wanted to make the open Chinese economy”. In short, main goals seem to
zone a snapshot of how China can upgrade its economic include opening up the service sector and allowing
structure (CCTV.com 2013). more opportunities for foreign investment (Tiezzi 2013).
Shanghai Party chief Han Zheng told Caixin that the
84 Shanghai Free Trade Zone’s crucial reform has been “to
