China ‘exempts’ foreign businesses from restrictions in Shanghai free trade zone

Out-Law News | 30 Sep 2014 | 11:20 am | 1 min. read

China's State Council has decided to temporarily adjust some special administrative measures on foreign investment in certain industries in the China (Shanghai) Pilot Free Trade Zone (FTZ). The decision was published on 28 September. 

“The Shanghai FTZ will be temporarily exempt from restrictions on foreign investment in businesses like shipping, automobiles, civil aviation and infrastructure development,” said Xinhua, quoting a cabinet statement published on 28 September.

Xinhua  reported that a number of unspecified “restrictive articles in the country's foreign investment guidance catalogue” had also been “adjusted” in relation to the FTZ.

“Solely-owned foreign firms in the Shanghai FTZ will be allowed in sectors that are only open to joint ventures nationwide, such as research and development of facilities for high-speed railways, passenger trains and inter-city rails, designer yachts and luxury liners, as well as development and manufacture of parts of civil airplane engines,” the Xinhua reportsaid.

In addition, foreign investors’ stake in a joint venture shipping agency in the FTZ will be allowed to exceed 51%, beyond the existing national regulatory cap of 49%, it said.

The move follows a call by Chinese premier Li Keqiang, who said more reform and innovation is needed in the FTZ to “breed new advantages for the Chinese economy”.

Li, who toured the FTZ earlier this month, said: “Companies should not be allowed to lose at the starting line due to excessive government regulations and approval procedures.”

Some 12,000 firms have been set up in the 29-square-kilometre FTZ since its launch in September 2013, Xinhua said.

A total of 1,016 foreign-funded projects worth $5.4 billion were launched in the FTZ in the first half of this year. The number “accounted for nearly half of all foreign-funded projects in the city and nearly 20% of projects launched in the zone”, according to the Shanghai Commission of Commerce.

FTZ vice-chairman Zhu Min said: “It takes time for foreign companies to analyse the feasibility of investment in the zone. Now many have completed their observation period and started to take action.”

There was an increase in the number of foreign firms setting up branches in the FTZ when more barriers to overseas investments were revoked earlier this year, Zhu said. “With further policy innovation, we expect more foreign companies will turn their eyes toward the zone.”

The chairman of the Shanghai Commission of Commerce Shang Yuying told Shanghai Daily last August that the city had become an increasingly attractive location for foreign investment. The top-100 foreign companies “generate more than half of trade volume, sales and taxes by foreign companies here,” Shang said.

Shang said: “Foreign investment has played a key role in Shanghai’s economy. Shanghai will continue to open the market for foreign investors while improving the investment environment for all.”