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Shanghai Daily News Digest

China (Shanghai) Free Trade Zone Trial - 2016-10-14


In March 2013, Chinese Premier, Li Keqiang inspected Waigaoqiao Free Trade Zone in Pudong and encouraged Shanghai to actively explore how to establish a free trade experimental zone within 28 square kilometers based on the existing integrated free trade zone, to be opened wider to the outside world and improve the mechanism of the open economy system. The State Council officially approved the establishment of China (Shanghai) Free Trade Zone Pilot in August the same year and issued Overall Scheme of China (Shanghai) Free Trade Zone Pilot. The Shanghai Free Trade Zone was established on September 29, 2013.
In the initial period of the Shanghai Free Trade Zone, it covered an area of 28.78 square kilometers. The State Council was authorized by the NPC Standing Committee on December 28, 2014 to extend the area of China (Shanghai) Free Trade Zone Pilot to 120.72 square kilometers, covering seven areas of Shanghai: Waigaoqiao Free Trade Zone, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port Area, Shanghai Pudong Airport Comprehensive Free Trade Zone, Jinqiao Export Processing Zone, Zhangjiang High-tech Park and Lujiazui Finance & Trade Zone.
Why is the State Council building a free trade zone in Shanghai? What kind of results have been achieved to date? What are the plans for the future?
The implications of the establishment of the Shanghai Free Trade Zone

With the trend to global investment and free trade, the reconstruction of international investment and trade rules has been accelerated. The establishment of a trial free trade zone can enable China to further integrate into economic globalization and provide a new platform for cooperation with the rest of the world. In China, the FTZ can be considered as an “experimental field” to comprehensively deepen reform. Opening up can help reform and expand economic growth under the New Normal. The establishment of a FTZ for Shanghai can help MNCs’ global allocation through providing preferential policies on tax and foreign exchange so as to prompt more financial institutions to register and start their business in Shanghai. The establishment of a FTZ helps to cultivate and concentrate marine insurance and other shipping service businesses in Shanghai so as to solve the problem of financial support in the construction of the shipping center. The establishment of a FTZ also helps Shanghai attract more processing, manufacturing, trade and logistics enterprises, creating a more significant cumulative logistical effect.

The Achievement of the Shanghai FTZ
The construction of the Shanghai FTZ has made significant achievements after over two years of innovative practice, mainly in three aspects. One is accelerating the economic transformation and upgrading of Pudong New Area. Driven by the establishment of the FTZ, GDP of Pudong New Area enjoyed a growth of 9.1% in 2015, 2.2% higher than that of Shanghai. The proportion of tertiary industry reached 70%, with annual growth of 3% in nearly two years. Second, economic vitality has been enhanced in the Shanghai FTZ. The number of newly established companies in the FTZ reached 18,000 in 2015, increased by 20% compared to 2014, accounting for 20% of the total in the FTZ. Nearly half of foreign enterprises are located there. Third, core functions have been constantly improved. With the FTZ’s financial reform, Shanghai's financial market turnover reached 1463 trillion yuan, equivalent to 3.5 times that of five years ago. The bonded area in the free trade zone transacted imports and exports amounting to 741.55 billion yuan, accounting for 26.4% of that of Shanghai. The container throughput of Yangshan Port and Waigaoqiao Port Areas container totaled 33.572 million RMB, 3.7% up, consolidating Shanghai port’s position in the world.

In addition, institution innovation, as a core task of the Shanghai FTZ, has achieved fruitful results over the past two years, mainly in the following four aspects: an investment management system with the core of negative list has been established and a more open and transparent investment management system has been formed; a trade regulation system with the emphasis on trade facilitation has been implemented, and supervision level and ability has been constantly improved; a financial innovation system with the goal of capital account convertibility and financial openness has been explored to provide service for the real economy; a supervision system with the core of government function transformation has been explored to update the government's management style.

Future Planning

According to the “Thirteenth Five-year” Plan, Shanghai Free Trade Zone in the future will adhere to the core of system innovation, speed up the establishment of an institutional system coherent with international investment and trade practice and take the lead in forming a rule-of-law, internationalized and facilitated business environment, exploring a new road for China to promote FTZ strategy and participate in global economic governance. Shanghai will comprehensively implement pre-access national treatment and a negative list management system, promote pilot reforms such as the separation of “certifications” and “licenses” and ensure equal treatment and fair competition between domestic and foreign enterprises. Shanghai will take advantage of the first trial experience to promote a service industry more open to the outside world and to ease the restrictions of foreign investment access. Shanghai will also aim at international high-level trade facilitation, deepen the reform of the trade regulation pattern, optimize the “single window” of international trade, improve the state of goods classification regulation, expand the customs integrity management system application, improve the efficiency of customs clearance and fully implement the integration of customs clearance. According to the state deployment and requirements, Shanghai will accelerate capital account convertibility, cross-border use of RMB, financial services opening up and building an international financial market, improve financial regulation and promote financial open pilot in Shanghai FTZ and linkage development of Shanghai International Financial Center development. Shanghai will speed up innovation in the government management mode and support Pudong New Area to transform government functions, and the post-supervision system and take the lead in the establishment of a district government management system matched with the new open economy system. Shanghai will promote the emulation and promotion of system innovation achievements, continuously enlarge spillover and radiation effects of Shanghai Pilot Free Trade Zone and promote the initiatives of district governments and departments to buttress system innovation.


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