On December 28, 2014, the State Council approved three new pilot free trade zones in Guangzhou, Tianjin and Fujian, as well as the expansion of the China (Shanghai) Pilot Free Trade Zone (“Shanghai FTZ”) to include more areas closer to downtown Shanghai (“New FTZs”). The New FTZs took effect on March 1, 2015, providing increasing opportunities for foreign companies interested in doing business in China.
Following the development path of the current Shanghai FTZ, the General Office of the State Council published the general plan for the three New FTZs in Guangzhou, Tianjin and Fujian on April 8, 2015. On the same date, relevant authorities enacted a series of detailed rules: (i) Administrative Measures for the Record- Filing of Foreign Investment in Pilot Free Trade Zones (for Trial Implementation),Interim Measures for National Security Review concerning Foreign Investments in Pilot Free-Trade Zones and (iii) Special Administrative Measures (Negative List) for Foreign Investment Admission in Pilot Free-Trade Zones, which took effect on May 5, 2015 (“Detailed Rules”).
The Detailed Rules mainly introduce benefits for foreign direct investment in the New FTZs, which are similar to those implemented in the Shanghai FTZ in the past two years. Under the Detailed Rules, approval will generally not be needed , being replaced by record-filing for foreign investment in sectors not specified in the negative list relating to:
- establishing wholly foreign-owned enterprises (“WFOEs”), Sino-foreign equity joint ventures (“EJVs”) and Sino-foreign cooperative joint ventures (“CJVs”);
- changing the total amount of investment and registered capital;changing or transferring equity or cooperation interest;
- pledging equity;
- carrying out a merger or division;
- changing business scope and duration of business operation;
- early termination;
- changing method or time limit for capital contribution;
- early recovery of investment by foreign investor of a CJV;
- changing enterprise name and registered address.
Although the general plans for the New FTZs foresee that other areas will be liberalized, including foreign exchange, customs and tax, the relevant governments have yet to enact detailed rules on these potential benefits.