Page 86 - 2017 White Paper
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7 White Paper on the Business Environment in China
transform the government’s role, “ adding that “the most Premier Li, a key supporter of the SFTZ, sent “a message
important task now involves reforming the administrative of top-level uncertainty”about the SFTZ (Kazer, Geng and
review system” (Ibid.). Li 2013).
Xinhua quotes Han Zheng, Shanghai branch secretary A “negative list” running to 10 pages with more than
of China’s Communist Party, as stating that the success 200 restrictions was later announced. Those included
of the SFTZ is its replicability – the mechanisms which limits on investments in auto, banking, insurance,
can be copied and promoted on a national scale. Mr. Han telecommunications and broadcasting as well as cinema,
said: “ The FTZ is a testing ground for all of China, not our film and TV production. Investment in news portals and
private plot. New measures here should be applicable online gaming would be banned (Kazer, Geng and Li
elsewhere”. He declared that these new measures reflect 2013). In July 2014, the Shanghai municipality unveiled
China’s intent to continue opening up and deepen an upgraded version of the zone’s “negative list” with the
reform, saying, “It is not just for local development”. He number of items on the list cut from 190 to 139, hailed as
also added that a “power list” within the next two or three “a major breakthrough”(South China Morning Post 2014a).
years to “increase transparency” is being considered
(Xinhua 2014). A thorough analysis of the changes to the revised
negative list, as conducted by Dezan Shira & Associates,
What do the features of the SFTZ mean for foreign reveals greater cause for celebration (Zito, Chen and
investors? Forbes enumerates: Yao 2014). Overall, the majority of these changes are
concentrated in the categories of (C) Manufacturing and
- The full convertibility of the yuan. Though the (G) Transportation, Warehousing, and Postal Services,
State Administration of Foreign Exchange announced in and to a lesser extent (F) Wholesale & Retail. The financial
January 2011 that the currency would be fully convertible industry received a strong boost in the revisions, with
by 2016, the SFTZ “not only accelerates the timetable but foreign investment now freely permitted into investment
helps put it in action on the global market” (Broderick banks, financial companies, trust companies, and currency
2014). brokerage companies. Terms governing investment into
China’s booming healthcare industry were also revised,
- Foreign companies are already allowed to invest including abolition of the RMB 20 million minimum
freely in banks—with reduced transaction costs for firms investment and maximum operation period of 20 years
to create more efficient trading (Ibid.). for medical institutions (Ibid.). The cybercafé industry
was liberalized, along with a larger trend of relaxed
- Even before the free-trade zone opened, the restrictions on the entertainment industry in the FTZ
value of real estate skyrocketed in the surrounding areas; where previously China’s twelve-year ban on video
there are no more limits on the foreign percentage of joint game consoles was lifted. Investors from Hong Kong and
construction projects with Chinese developers within the Macau were granted several preferential policies by the
SFTZ (Ibid.). revised Negative List including freer investment into the
construction and operation of movie theaters, as well as
- China has started trading gold internationally a wide range of aviation transport ground-based services
within the SFTZ starting in the final quarter of 2014. The (Ibid.).
newly lifted restrictions are already having an effect;
Singapore is introducing a physical gold contract with During President Xi Jinping’s first visit to the SFTZ
China (Ibid.). in May 2014, he delivered a cautious endorsement.
According to Xinhua, President Xi declared: “The decision
Launched a day ahead of the October 1 National Day to build the zone was an important step of China’s
holiday in 2013, the SFTZ had earlier been tipped to be the reform and opening up in modern times”. He added that
testing ground for liberalizing interest rates, now subject management of the SFTZ “should combine structural
to central bank guidelines, and contribute to the longer- reform and the exploration of new methods, while
term goal of opening the capital account, which covers controlling risks and gradually making improvements”.
investments. However, the Wall Street Journal was quick A few days later, he commented that, “The experience
to point out that these reforms got no specific mention on gained at China’s Shanghai Pilot Free Trade Zone
opening day. According to an official statement, financial (Shanghai FTZ) can be copied to more places as soon
experiments would proceed “as conditions allowed” and
“risks would be controlled”. Rules would be put in place
over a three-year period. The opening day’s no-show by
86
transform the government’s role, “ adding that “the most Premier Li, a key supporter of the SFTZ, sent “a message
important task now involves reforming the administrative of top-level uncertainty”about the SFTZ (Kazer, Geng and
review system” (Ibid.). Li 2013).
Xinhua quotes Han Zheng, Shanghai branch secretary A “negative list” running to 10 pages with more than
of China’s Communist Party, as stating that the success 200 restrictions was later announced. Those included
of the SFTZ is its replicability – the mechanisms which limits on investments in auto, banking, insurance,
can be copied and promoted on a national scale. Mr. Han telecommunications and broadcasting as well as cinema,
said: “ The FTZ is a testing ground for all of China, not our film and TV production. Investment in news portals and
private plot. New measures here should be applicable online gaming would be banned (Kazer, Geng and Li
elsewhere”. He declared that these new measures reflect 2013). In July 2014, the Shanghai municipality unveiled
China’s intent to continue opening up and deepen an upgraded version of the zone’s “negative list” with the
reform, saying, “It is not just for local development”. He number of items on the list cut from 190 to 139, hailed as
also added that a “power list” within the next two or three “a major breakthrough”(South China Morning Post 2014a).
years to “increase transparency” is being considered
(Xinhua 2014). A thorough analysis of the changes to the revised
negative list, as conducted by Dezan Shira & Associates,
What do the features of the SFTZ mean for foreign reveals greater cause for celebration (Zito, Chen and
investors? Forbes enumerates: Yao 2014). Overall, the majority of these changes are
concentrated in the categories of (C) Manufacturing and
- The full convertibility of the yuan. Though the (G) Transportation, Warehousing, and Postal Services,
State Administration of Foreign Exchange announced in and to a lesser extent (F) Wholesale & Retail. The financial
January 2011 that the currency would be fully convertible industry received a strong boost in the revisions, with
by 2016, the SFTZ “not only accelerates the timetable but foreign investment now freely permitted into investment
helps put it in action on the global market” (Broderick banks, financial companies, trust companies, and currency
2014). brokerage companies. Terms governing investment into
China’s booming healthcare industry were also revised,
- Foreign companies are already allowed to invest including abolition of the RMB 20 million minimum
freely in banks—with reduced transaction costs for firms investment and maximum operation period of 20 years
to create more efficient trading (Ibid.). for medical institutions (Ibid.). The cybercafé industry
was liberalized, along with a larger trend of relaxed
- Even before the free-trade zone opened, the restrictions on the entertainment industry in the FTZ
value of real estate skyrocketed in the surrounding areas; where previously China’s twelve-year ban on video
there are no more limits on the foreign percentage of joint game consoles was lifted. Investors from Hong Kong and
construction projects with Chinese developers within the Macau were granted several preferential policies by the
SFTZ (Ibid.). revised Negative List including freer investment into the
construction and operation of movie theaters, as well as
- China has started trading gold internationally a wide range of aviation transport ground-based services
within the SFTZ starting in the final quarter of 2014. The (Ibid.).
newly lifted restrictions are already having an effect;
Singapore is introducing a physical gold contract with During President Xi Jinping’s first visit to the SFTZ
China (Ibid.). in May 2014, he delivered a cautious endorsement.
According to Xinhua, President Xi declared: “The decision
Launched a day ahead of the October 1 National Day to build the zone was an important step of China’s
holiday in 2013, the SFTZ had earlier been tipped to be the reform and opening up in modern times”. He added that
testing ground for liberalizing interest rates, now subject management of the SFTZ “should combine structural
to central bank guidelines, and contribute to the longer- reform and the exploration of new methods, while
term goal of opening the capital account, which covers controlling risks and gradually making improvements”.
investments. However, the Wall Street Journal was quick A few days later, he commented that, “The experience
to point out that these reforms got no specific mention on gained at China’s Shanghai Pilot Free Trade Zone
opening day. According to an official statement, financial (Shanghai FTZ) can be copied to more places as soon
experiments would proceed “as conditions allowed” and
“risks would be controlled”. Rules would be put in place
over a three-year period. The opening day’s no-show by
86
