On September 29, 2013, China officially opened another special zone in its ongoing economic reform, China (Shanghai) Pilot Free Trade Zone ("the Pilot Free Trade Zone"). Integrating four existing bonded zones in Shanghai, Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area, and Pudong Airport Comprehensive Free Trade Zone, the Pilot Free Trade Zone covers an area of 11 square miles. At the opening ceremony, 25 Chinese domestic companies and 11 foreign-invested companies were granted business licenses.
Unlike hundreds of other economic development zones and bonded zones in China, the Pilot Free Trade Zone is designed as a national strategic experimental field to test a series of reforms in investment, finance, trade, and government administration that potentially could be promoted nationwide. Accordingly, companies in the zone are expected to enjoy looser government controls and more pro-investment measures that are not available elsewhere in China.
The State Council published the Overall Plan for China (Shanghai) Pilot Free Trade Zone on September 28, clarifying the goals, major tasks, and policies for the zone. The Chinese government aims to build "a world-class pilot free trade zone with convenience for investment and trade, freedom for currency exchange, efficient and convenient supervision and administration, and normative legal environment." Within two to three years, the Chinese government expects to accomplish five major tasks, i.e., accelerating the change of government functions, expanding the liberalization of sectors for investment, promoting the change of trade development patterns, deepening the liberalization and innovation of the financial sector, and perfecting the legal system. To facilitate investment in the zone, besides simplifying administrative procedures, the Chinese government has also established a series of preferential tax programs for companies in the zone, including payment of income tax by installments for certain assets, export rebates for finance leases, and exemption of import tariffs for imported machinery and equipment.
Along with the Overall Plan, the Chinese government issued a list of 18 service industries open to foreign investors in the Pilot Free Trade Zone, including certain financial services, shipping, telecommunication and game consoles, legal services, credit investigation, tourism, employment placement, investment companies, engineering design, construction services, entertainment, education and training, and medical services. Authorized by the central government, the government of Shanghai Municipality published a negative list on September 29, restricting foreign investment in 18 other categories, such as production of certain chemical and medical products, smelting of certain non-ferrous metals products, and manufacturing of certain auto parts.
Government agencies have shown support for the Pilot Free Trade Zone. For example, the National Development and Reform Commission has selected the Pilot Free Trade Zone as one of its priorities for the second half of 2013. China's Insurance Regulatory Commission has also pledged to support in-zone companies. Chinese state-owned banks are also following the lead of the central government. For instance, the Agricultural Bank of China allocated 250 billion RMB of credits for the Pilot Free Trade Zone in as early as August.
- Lingna Yan
