Shanghai held a mobilization meeting for deepening reform in the pilot free trade zone (FTZ) to deploy relevant works on May 15.
In March this year, the State Council issued the plan for comprehensively deepening the reform and opening-up in Shanghai pilot FTZ. The plan proposes 98 reform tasks and 24 key work tasks for 2017, including formulating the plan for the construction of free trade port zone before the year end, which have already launched in Shanghai.Zhu Min, deputy director of Shanghai Municipal Development and Reform Commission, pointed out at a recent press conference that by transforming from “trade and investment facilitation” to “trade and investment liberalization”, Shanghai FTZ steps to a new level in opening up and promoting investment and trade liberalization and facilitation.
Chen Bo, Secretary-General of Free Trade Zone Research Institute, Shanghai University of Finance and Economics, pointed out in an interview with the 21st Century Business Herald that the idea of investment and trade facilitation is within the framework of the bonded area; while liberalization will include more reforms in tax system, capital flow and human resource flow, and the idea is more close to the all-around opening-up pattern in Hong Kong and Singapore.
The plan issued in March this year is the third reform plan since the establishment of Shanghai FTZ. It is therefore also known as Shanghai FTZ reform-version 3.0.
The plan proposed that by 2020, Shanghai FTZ should first establish an institutional system that is consistent with common international investment and trade rules and become an international FTZ that has fair and efficient regulatory system and convenient business environment to support trade and investment liberalization.
Compared to the reform plan issued in 2013 and 2015, the biggest highlights in the third version reform plan are that it proposes to build free trade port zone and update "investment and trade facilitation" to "investment and trade liberalization".
Chen believed that there are lots of ideas on the question what the free trade port zone will do, and the important thing is that risk control, stress testing and other works will be carried out.
The liberalization of investment and trade is a necessary condition for the realization of free trade port area. “The idea of facilitation is still within the framework of bonded area. It stresses better import and export management model. It is an improvement with few risks. Liberalization makes more progresses on this basis. It will work hard for the expansion of tax-free areas and the free flow of personnel and capital within certain area,” Chen said.
Zhu said that this goal reflects Shanghai’s FTZ strategic positioning to assume the nation’s mission and promote all-round opening-up in accordance with international standards. It also reflects the latest requirements of investment and trade facilitation rules in the international community.
Serve for the “Belt and Road” Initiative
To serve for the country’s the “Belt and Road” Initiative and become bridgehead to promote China to go global is another new positioning of Shanghai FTZ.
China’s outbound investment has exceeded the scale of foreign investment in China since 2014. Shanghai FTZ has become an important platform to promote enterprises across the country to go out. Statistics show that as of the end of 2016, Shanghai has completed a total of 1,577 overseas investment projects, of which the investment from China totaled more than 54.6 billion US dollars.
"Shanghai FTZ will facilitate the ‘Belt and Road’ Initiative from two aspects: system and actions. The ‘Belt and Road’ Initiative is only a vision. It sees no support in cooperation mechanism and system guarantee. So we need to learn experience from the FTZ. The experience from the FTZ is not only consistent with the country’s requirement to open up but also is adaptable for our country,” Chen said.
In terms of actions, Shanghai FTZ can open wider or provide customized measures for countries along the “Belt and Road” routes in capital flow, cargo clearance and warehousing and circulation.
According to the plan, Shanghai will establish a comprehensive institute to promote foreign investment, a property rights trading center and technology transfer platform and an overseas investment public information service platform. It will build Shanghai port into an Asia-Pacific supply chain hub that connects key ports at home and abroad. It will establish a linkage between foreign capital and domestic assets and explore offshore tax system.
Offshore tax system has been mentioned in all the three versions of reform plans. Zhu said that the offshore tax reform had made preliminary progress. Based on service and trade innovation pilot policies, Shanghai FTZ has expanded the scope of taxation in research and development, traditional Chinese medicine and other fields.
In addition, the offshore tax system also includes customs duties for goods trade. Most trades in China are transit trades. Based on the old rules, goods should first pay customs duties before entering China’s warehouse. When goods are finally shipped out of China, customs duties will be rebated. “According to the current offshore tax system, goods don’t have to pay duties even after they enter the warehouse and do not their final buyers.” Chen said.
The change in the timing of paying customs duty has a huge impact. If these is no such business, a large number of international shipping logistics and transport business will flow to other countries.
Translated by Coral Zhong
Latest comments