Shanghai FTZ accelerates reform, opening-up

Officials, businesses laud zone's success in facilitating foreign investment

China (Shanghai) Pilot Free Trade Zone (FTZ) has greatly eased restrictions on foreign investment with a shorter negative list, expanded fields of investment and financial opening-up in its first year, Shanghai officials said at a press conference.

The press conference was held on Friday, just before the first anniversary of the establishment of the FTZ on Monday.

"The zone has achieved important initial success in building a systematic framework that can meet the standard of international investment and trading system," Ai Baojun, Shanghai's vice mayor and the FTZ head, said at the press conference.

As of September 15, 1,677 foreign-funded firms have registered in the zone, accounting for 13.7 percent of the 12,266 newly established enterprises, Ai said.

In addition, 283 projects had been started in the zone after the introduction of 23 measures designed to open up its services sector to foreign investment, he noted.

In July, the Shanghai municipal government cut the "negative list" by almost one-third to 139 items, from 190 items in the 2013.

A "negative list" names all the areas that are banned for companies, and shortening the list will give more play to the market.

In terms of financial reforms, in the first eight months of this year, cross-border yuan settlement in the zone reached 156.3 billion yuan ($25.4 billion), accounting for 15 percent of the city's total.

During the same period, yuan funds borrowed from overseas markets totaled 17.4 billion yuan and funds worth 27.2 billion yuan were transferred through cash pooling.

Eighty-eight licensed financial institutions were authorized to enter the FTZ, and by September 21, 10 Chinese banks have opened 4,110 free trade accounts.

In terms of trade, Ai said that during the January-August period, import and export volume in the zone increased 11 percent year-on-year.

Logistics and storage costs dropped 10 percent on average, thanks to over 60 supportive measures introduced by the inspection, quarantine and maritime authorities to cut costs.

The average time for customs clearance is now three to four days shorter than before. Half of the newly registered companies in the zone are trade and logistics companies, he said.

The innovation of the customs rules in FTZ have brought tangible benefits to traders.

"We saw expedited clearance in the zone. This is important for us because as a logistics company, saving one day in clearance means saving lots of storage costs," SK Yeung, managing director of Geodis Wilson China, a logistics company which owns three warehouses in Yangshan Deep Water Port, part of the FTZ, told the Global Times on Saturday.

"Now we're able to shorten the time to clear customs by one to two days, and cut costs by 15 to 20 percent for our clients," he said.

Yeung hopes policies of the FTZ can be introduced nationwide.

Li Ying, head of supply chain China with Mopar Auto Parts Trading, said, "We're also benefiting greatly from the policy which allows mobile parts to enter the free trade zone without having to obtain a China compulsory certificate mark. This has considerably quickened our clearance procedure."

"The essence of the FTZ is innovation, rather than just favorable policies. Companies in the zone are provided more freedom and better business environment," Li Guanghui, a research fellow with the Ministry of Commerce, told the Global Times on Saturday.

Despite some achievements of the zone, the progress of the new testing ground of China's reform is slower than the market had expected, according to foreign media reports.

"The biggest problem with the FTZ is that it probably isn't bold enough in its reforms," He Weiwen, a standing council member at the China Society for World Trade Organization Studies, told the Global Times on Saturday.

The "negative list", the major highlight of the zone, for example, is too long even after it was shortened this year, and there are still lots of restrictions on foreign entry into the Chinese market, He said.

During a visit to the FTZ on September 18, Premier Li Keqiang said that foreign firms should be treated equally with domestic firms, after an official at the FTZ mentioned that private firms are now enjoying the same status as the State-owned enterprises in the FTZ.