On 30 August 2013 the Standing Committee of the Twelfth National People’s Congress adopted the Decision regarding Authorization to the State Council for Interim Adjustment of Administrative Examination and Approval Stipulated in Relevant Laws and Regulations in the Shanghai Pilot Free Trade Zone (“Decision”).
The establishment of the Shanghai Pilot Free Trade Zone (“FTZ”) was approved by the State Council in the middle of August 2013. The Shanghai FTZ covers Waigaoqiao Free Trade Zone, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Harbor and Pudong Airport Bonded Zone and has a total area of 28 square kilometers.
According to the Decision, the State Council is authorized to suspend in the Shanghai FTZ certain administrative examination and approval requirements stipulated in the PRC Wholly Foreign-Owned Enterprise Law (“WFOE Law”), the PRC Sino-Foreign Equity Joint Venture Enterprise Law (“EJV Law”) and the PRC Sino-Foreign Cooperative Joint Venture Enterprise Law (“CJV Law”) (jointly “FIE Laws”). Such suspension becomes effective from 1 October 2013 and will last for a trial period of three years. If the suspension of administrative examination and approval proves feasible, the FIE Laws will be amended. If the suspension proves infeasible, the relevant stipulations in the FIE Laws will be resumed.
Under the Decision, the administrative examination and approval applicable to the following items will be replaced by mere filing for recordal. The relevant items are summarized in the table below:
Click here to view table
The new regulations are a clear sign that the Government is eager to reduce red tape in administration of foreign investment. The reform aims at increasing attractiveness of China for foreign investment and improving competitiveness of the Shanghai FTZ. Replacing approval requirements by mere recordal removes administrative burdens for foreign investors and speeds up the implementation process of projects.
For the time being, such advantages are only offered in the Shanghai FTZ. As common, reforms are first implemented for trial in a geographically limited region. If they work well, they are then extended to the entire county. However, currently, details for implementation are still lacking e.g. when and how the recordal shall be conducted. We will pay close attention on this topic and keep you updated.
It is also reported that there will be other foreign-related reforms in crucial areas within the FTZ including more tax-friendly rules for trade and investment, interest-rate liberalization, RMB convertibility, financial product innovations and offshore businesses development etc. We will inform you once the general scheme of incentives in the FTZ has been published.