The construction of pilot free trade zones (hereinafter referred to as the FTZs) is a pioneering program of China for opening-up, and the FTZs serve experimental fields for deepening reform. Different from the economic and technological development zones set up in the early stage of the implementation of the reform and opening-up policies, the FTZs are not zones with concentrated preferential policies but a highland for reform and opening-up, where institutional innovation is made to meet high international standards and economic and trade rules and form up a fair, transparent and high-efficient market environment to reduce the institutional cost of enterprises and explore experience and modes that can be repeated and extended.   

 

FTZs with optimized business environment become hot land of foreign investment

 

Through many years’ exploration and centering on the task to accelerate the construction of a new system of open economy, the FTZs in Shanghai, Guangdong, Tianjin and Fujian become bold to make innovations to: deeply pilot the Pre-Establishment National Treatment and Negative List management modes for foreign investment; continuously expand the reform of business registration system, provide “one window services” for enterprises. Focusing on trade facilitation, the “single window” service system for international trade has been continuously optimized. In average, the customs clearance efficiency is improved by about 40%, and a number of innovative achievements have been made in investment, trade, financial opening-up, business regulation and government services. The Negative List management system for foreign investment has been basically established and a good business environment has been created so that many well-known foreign-invested enterprises have been attracted to the FTZs. In accordance with the survey results of the American Chamber of Commerce in Shanghai, most enterprises believe that the trade facilitation measures of China (Shanghai) Pilot Free Trade Zone provide favorable conditions that are more attractive than preferential tax policies. By the end of 2015, the number of newly established foreign-invested enterprises in each of the FTZs in Guangdong, Tianjin and Fujian had increased by more than two times year-on-year, respectively accounting for 42.1%, 72.2% and 61.5% of the number of such enterprises in the whole provinces (municipality) where the FTZs are based in. Concerning the expanded Shanghai FTZ, such proportion reached 50%. From January to May 2016, a total of 4,060 foreign-invested enterprises were established in the four FTZs mentioned above, with contracted foreign investment of RMB308.6 billion. Of them, 4,030 enterprises were established through registration procedures, with contracted foreign investment of RMB308.4 billion, respectively accounting for 99.3% and 99.9%.

 

Exploration for deeply opening the FTZs up to lead to a new boom of foreign investment

 

Recently, the State Council has taken more great measures to carry out “new policies” in the four FTZs and make temporary adjustment of relevant administrative laws and regulations to reduce examination and approval procedures and expand industrial opening-up. 

 

The first is to continuously promote the Negative List management, further reduce examination and approval procedures for foreign investment and expand registration coverage. In addition, the implementation of the Catalogue for the Guidance of Industries for Foreign Investment and relevant provisions under other laws and regulations should be cancelled, while the examination and approval system for establishment, separation, merging, transfer, capital contribution mode, operation term and dissolution of foreign-invested enterprises should be changed into registration-based management system.

 

The second is to continuously expand and deepen the opening-up of manufacturing and service industries. The implementation of the Catalogue for the Guidance of Industries for Foreign Investment and relevant provisions under other laws and regulations should be cancelled to allow establishment of wholly foreign-owned steel manufacturing enterprises and temporarily cancel the restrictions on foreign-invested enterprises for dealing with deep processing of rice, flour and other products, grain purchasing, grain and cotton wholesale as well as construction and operation of large agricultural production wholesale markets; foreign investors should be allowed to establish solely-invested performance brokerage agencies and international shipping enterprises; foreign investors should be allowed to establish solely-invested air transportation sales agencies, and the restrictions on foreign investment in maintenance of general-purpose planes, such as that the Chinese party should be the controlling shareholder and responsible for operations in the international maintenance market, should be relaxed; establishment of entertainment venues solely invested and operated by foreign investors should be allowed, and foreign-invested travel agencies should be allowed to deal with outbound travels of residents of the Chinese mainland; foreign investors should be allowed to deal with salt wholesale and construction and operation of gasoline stations in the form of sole investment.

 

In recent years, high-end manufacturing and high-tech service industries have become two hot spots and highlights for foreign investment. From January to June 2016, the foreign investment in actual use in the high-tech service industry reached RMB53.74 billion, up 99.7% year-on-year; that in the high-tech manufacturing industry reached RMB31.47 billion, up 6.2% year-on-year. The implementation of new policies again deepens the Negative List management and greatly reduces the examination and approval procedures for foreign investment. It is helpful for enterprises to improve efficiency and reduce operation cost. It is also helpful for the optimization of the business environment of the FTZs so that they can be more attractive to foreign investors. The expanded opening-up of the manufacturing and service industries provides opportunities for attracting foreign investors to make investment in manufacturing of new energy vehicles and steel, agricultural product processing and other manufacturing sectors, especially in the fields of outbound tourism, entertainment, performance, construction and operation of gasoline stations, air services and other modern service industries. It will play an active role in driving China to expand use of foreign investment and accelerate industrial transformation and upgrading with the help of domestic and foreign advanced technologies and management experience.

 

Following the implementation of the new policies, the FTZs are expected to attract foreign investment in a faster way and see another boom of foreign investment.

 

Source: Translated from Invest Guangzhou, August 9, 2016