Page 68 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
had expedited the agenda to update the lists since the thresholds in designated FTZs for building facilities and
beginning of the year, before the US threatened to levy recruitment of workers by foreign firms. The government
tariffs on Chinese imports. Sang Baichuan, a professor at will also allow foreign carriers to offer passenger and
the University of International Business and Economics, cargo services from Zhengzhou and Xi’an, two free trade
said there is still room for further reduction of the zones in central China, to other countries. Red tape for
negative list, and the government needs to coordinate car imports would also be cut in qualified free trade
the two lists — one for nationwide implementation and zones, the government promised. Qualified individuals
the other for FTZs — into one simplified version (Jing, approved by the government will also be allowed to
Shuiyu and Zhong). invest directly in overseas securities from free trade
zones – China now only allows locals to buy overseas
One of the more recent additions is a plan establishing stocks and bonds via cross-border investment channels
the southern island province of Hainan as a pilot such as the Shanghai-Hong Kong stock connect program.
FTZ. In developing the Hainan FTZ, a major step that Banks in the free trade zones will be encouraged to offer
demonstrates China’s resolution to further open up yuan loans to overseas institutions and projects and
and promote economic globalization, the island will be qualified financial institutions will be able to conduct
granted more autonomy to reform, and speed up the yuan derivative businesses with foreign investors. Tang
fostering of a law-based, international, and convenient Wenhong, head of the department of foreign investment
business environment as well as a fair, open, unified, administration at the Ministry of Commerce, said the
and efficient market environment, according to the plan new measures for FTZs showed China’s determination
issued by the State Council. Hainan should be positioned to deepen domestic reforms and further open up its
as a pilot zone for comprehensively deepening reform market. Tang said successful experiences in the free trade
and opening up, a display of the country’s ecological zones would be promoted in the rest of the country.
civilization, an international tourism and consumption China has set up 12 free trade zones in the past five
center and a zone offering services and support for the years to support local development and boost foreign
country’s major strategies, according to the plan. Efforts investment. The latest, and biggest, project is making
should be made to pursue a more proactive strategy the entire tropical island of Hainan in southernmost
of opening up, accelerate the establishment of new China a free-trade zone. In China’s first imports expo in
institutions of the open economy, make new ground Shanghai, President Xi Jinping said the free-trade port
in pursuing opening up on all fronts, and build Hainan on Hainan would speed up the process of opening up,
into a key gateway to the Pacific and Indian Oceans. while Shanghai would have greater autonomy for “free
According to the plan, the Hainan FTZ will push trial trade” trials. But foreign firms remain skeptical about
reform in such fields as accelerating the establishment China’s commitment to improving market access in
of new institutions of the open economy, promoting the form of free trade zones. In November 2018, the
the innovative development of the service sector and European Union Chamber of Commerce in China, said
speeding up efforts to transform government functions. China’s pledges to further strengthen free trade zones to
It will also focus on the establishment of major risk control test new policies and liberalize the economy indicated
mechanisms and push forward trial programs in sectors a “timid” approach to reform. “European businesses are
including healthcare, culture, and tourism as well as green increasingly disenchanted with free trade zones,” it said.
development. By 2020, the plan aims to build Hainan The chamber said that in free trade zones, producers
into a high standard and high-quality FTZ that promotes were often separated from their customers, presenting
trade and investment facilitation, provides a good legal logistic challenges. China should focus on opening up
environment, thorough financial services, efficient new mainland sectors for foreign investment rather than
regulation, and a favorable ecological environment, and pursuing pilot reforms in areas that were “ring-fenced”
boosts the development of surrounding areas (Xinhua, from the rest of the country (Lee).
China Publishes).
Opportunities and Challenges
China has unveiled a series of measures to deepen
reforms in the nation’s FTZs amid growing skepticism In recent years, China has been touting the free trade
among trading partners over its commitment to opening zones – where many mainland restrictions on investment
up new markets to foreign investment. The State Council and business practices do not apply – as success stories in
said in 2018 that it would lower the minimum investment attracting foreign investment and boosting international
68
had expedited the agenda to update the lists since the thresholds in designated FTZs for building facilities and
beginning of the year, before the US threatened to levy recruitment of workers by foreign firms. The government
tariffs on Chinese imports. Sang Baichuan, a professor at will also allow foreign carriers to offer passenger and
the University of International Business and Economics, cargo services from Zhengzhou and Xi’an, two free trade
said there is still room for further reduction of the zones in central China, to other countries. Red tape for
negative list, and the government needs to coordinate car imports would also be cut in qualified free trade
the two lists — one for nationwide implementation and zones, the government promised. Qualified individuals
the other for FTZs — into one simplified version (Jing, approved by the government will also be allowed to
Shuiyu and Zhong). invest directly in overseas securities from free trade
zones – China now only allows locals to buy overseas
One of the more recent additions is a plan establishing stocks and bonds via cross-border investment channels
the southern island province of Hainan as a pilot such as the Shanghai-Hong Kong stock connect program.
FTZ. In developing the Hainan FTZ, a major step that Banks in the free trade zones will be encouraged to offer
demonstrates China’s resolution to further open up yuan loans to overseas institutions and projects and
and promote economic globalization, the island will be qualified financial institutions will be able to conduct
granted more autonomy to reform, and speed up the yuan derivative businesses with foreign investors. Tang
fostering of a law-based, international, and convenient Wenhong, head of the department of foreign investment
business environment as well as a fair, open, unified, administration at the Ministry of Commerce, said the
and efficient market environment, according to the plan new measures for FTZs showed China’s determination
issued by the State Council. Hainan should be positioned to deepen domestic reforms and further open up its
as a pilot zone for comprehensively deepening reform market. Tang said successful experiences in the free trade
and opening up, a display of the country’s ecological zones would be promoted in the rest of the country.
civilization, an international tourism and consumption China has set up 12 free trade zones in the past five
center and a zone offering services and support for the years to support local development and boost foreign
country’s major strategies, according to the plan. Efforts investment. The latest, and biggest, project is making
should be made to pursue a more proactive strategy the entire tropical island of Hainan in southernmost
of opening up, accelerate the establishment of new China a free-trade zone. In China’s first imports expo in
institutions of the open economy, make new ground Shanghai, President Xi Jinping said the free-trade port
in pursuing opening up on all fronts, and build Hainan on Hainan would speed up the process of opening up,
into a key gateway to the Pacific and Indian Oceans. while Shanghai would have greater autonomy for “free
According to the plan, the Hainan FTZ will push trial trade” trials. But foreign firms remain skeptical about
reform in such fields as accelerating the establishment China’s commitment to improving market access in
of new institutions of the open economy, promoting the form of free trade zones. In November 2018, the
the innovative development of the service sector and European Union Chamber of Commerce in China, said
speeding up efforts to transform government functions. China’s pledges to further strengthen free trade zones to
It will also focus on the establishment of major risk control test new policies and liberalize the economy indicated
mechanisms and push forward trial programs in sectors a “timid” approach to reform. “European businesses are
including healthcare, culture, and tourism as well as green increasingly disenchanted with free trade zones,” it said.
development. By 2020, the plan aims to build Hainan The chamber said that in free trade zones, producers
into a high standard and high-quality FTZ that promotes were often separated from their customers, presenting
trade and investment facilitation, provides a good legal logistic challenges. China should focus on opening up
environment, thorough financial services, efficient new mainland sectors for foreign investment rather than
regulation, and a favorable ecological environment, and pursuing pilot reforms in areas that were “ring-fenced”
boosts the development of surrounding areas (Xinhua, from the rest of the country (Lee).
China Publishes).
Opportunities and Challenges
China has unveiled a series of measures to deepen
reforms in the nation’s FTZs amid growing skepticism In recent years, China has been touting the free trade
among trading partners over its commitment to opening zones – where many mainland restrictions on investment
up new markets to foreign investment. The State Council and business practices do not apply – as success stories in
said in 2018 that it would lower the minimum investment attracting foreign investment and boosting international
68
