Shanghai Free Trade Zone Receives Final Approval
Aug. 26 – According to a statement released by China’s Ministry of Commerce on August 22, the establishment of a pilot free trade zone in Shanghai (the first of its kind in Mainland China) has been formally approved by the State Council.
Covering an area of 28.78 square kilometers, the new zone consists of the four following existing bonded zones:
- Waigaoqiao Free Trade Zone;
- Waigaoqiao Free Trade Logistics Park;
- Yangshan Free Trade Port Area; and
- Pudong Airport Comprehensive Free Trade Zone.
The statement provides that the establishment of the pilot zone is a crucial step in adapting to the current trends in global economic and trade development, and specifies that the main tasks of the zone will be as follows:
- Exploring new paths and models for China’s opening-up;
- Speeding up the transformation of government functions;
- Promoting the reform of the administrative system;
- Upgrading the means for economic development; and
- Optimizing economic structures.
Moreover, the experiences gained from the pilot zone are expected to be applied in other parts of the country. The statement further provides that the zone will adopt a “negative list” approach towards foreign investment management, meaning foreign investment in all sectors should be allowed unless listed as prohibited or restricted under the “negative list.” Currently, the “negative list” for the Shanghai Free Trade Zone has not yet been issued, but it is expected to be shorter than the “negative list” under the Foreign Investment Industry Catalogue.
There has been concern that the establishment of the pilot zone may create serious competition for Hong Kong. However, Ministry of Commerce Spokesman Shen Danyang has said that the main goal of the zone is to gather experience for deepening the country’s reform and opening-up, and concerns about a negative effect on trade and investment in Hong Kong are not justified.
The State Council has submitted plans to the Standing Committee of the National People’s Congress for deliberation, and the “Overall Plan for China (Shanghai) Free Trade Pilot Zone” will be released after relevant legal procedures have been completed. China Briefing will release further details as soon as they become available.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia.
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