On April 18, the People’s Daily newspaper did a full-page report, “After a Century of Struggle: Set Sail on a New Journey”, about Shanghai’s Pilot Free Trade Zone -“boldly test, boldly innovate, and self-improve”.
No. 9 Jilong Road, Pudong, Shanghai. On September 29, 2013, the Management Committee of China (Shanghai) Pilot Free Trade Zone was listed. Subsequently, the “Special Administrative Measures for Foreign Investment Access in China (Shanghai) Pilot Free Trade Zone” was released. This was the first time China has used a “negative list” to manage foreign investment in China, which quickly ignited market enthusiasm. A “negative list” specifies which industries foreign companies can and cannot invest in.
Investors and entrepreneurs were crowded in the corporate affairs hall of the Management Committee of the Pilot Free Trade Zone. During Golden Week 2013, Chen Yifei from the Registration Section of the Pudong Industrial and Commercial Bureau was urgently transferred to accept business start-up applications. “I was too busy to look up. I took the application materials and sent them to the back room. At the end of the day, the back room was filled with application materials that one couldn’t even enter the room.”
In less than half a year, more than 7,700 Chinese and foreign enterprises had been added to the pilot free trade zone. People were optimistic about the reform policies of the first pilot free trade zone in China.
President Xi Jinping had put forward clear requirements for the construction of the Shanghai Pilot Free Trade Zone: benchmark against the highest standards, look for shortcomings, boldly test, boldly innovate, and self-improve. This further demonstrates the role of greater comprehensive reforms and expanding the use of the free trade zone trial land, in order to demonstrate the country’s contribution to the world.
After more than 7 years, the “trial land” has expanded from 28.78km2 to 120.72km2 and a special area of Lingang has been added. As of late 2020, the Shanghai Pilot Free Trade Zone had established a total of 69,000 new enterprises, which is 1.7 times that of the same region in the previous 20 years. Among them, 12,000 were newly established foreign-funded enterprises and 328 institutional innovations were promoted from Shanghai to the whole country.
Benchmark against highest international standards and levels
Carry out free trade zone trials
Weng Zuliang, Member of the Standing Committee of the Shanghai Municipal Party Committee, Secretary of the Pudong New Area Party Committee, and Director of the China (Shanghai) Pilot Free Trade Zone Management Committee, said that the Shanghai Pilot Free Trade Zone implements the Central Party Committee’s decision and deployment, benchmarks against the highest international standards and levels, and conducts free trade. The experiment lays the foundation for future participation in bilateral, multilateral, and regional cooperation, and accumulates experience for the development of relevant negotiations on a new pattern of international trade, thereby providing strong support for China’s participation in the formulation of international economic and trade rules.
Since the 1990s, Shanghai has established a free trade zone. “Opening to the outside world, Shanghai has a rich experience, and it is the best choice to take the lead in the free trade zone experiment.” said Shen Yuliang, a researcher at the Shanghai Academy of Social Sciences.
With the support of the National Development and Reform Commission, the Ministry of Commerce, the People’s Bank of China, and the General Administration of Customs, Shanghai has set up 18 research teams to benchmark against each international trade rule, so that the pilot free trade zone can meet the highest international standards.
With the need to strive for a consensus on reform, trials were conducted, and multiple departments of the country was involved. After a year, the plan for a free trade pilot zone with Chinese characteristics was introduced.
Jian Danian, the deputy director of the Management Committee of the Shanghai Pilot Free Trade Zone, said: “Set sail on a huge ship and work hard on the mission. History will be written: Free trade zone, a new starting point for China’s opening up!”
Promote reform through opening-up
Straighten out the relationship between the government and the market
The Third Plenary Session of the Eighteenth Central Committee proposed to “let the market play a decisive role in the allocation of resources and give better play to the role of the government.”
A member of the Committee of Finance and Economics of the National People’s Congress said, “The pilot free trade zone has found a specific starting point to straighten out the relationship between the government and the market.”
A “negative list” was launched and continuously improved in accordance with the progress of reforms. In the initial negative list, there were 190 “forbidden areas” in 18 industry categories that foreign companies were not allowed to enter or were restricted and allowed to enter unless prohibited. After several “slimming down” of the list, there were only 30 “forbidden areas” left in 2020.
The reforms followed one after another: change of the registered capital paid-in system to a subscription system, review and filing reforms, notification commitment reforms, and the separation of licenses, one industry and one license. Xu Mingqi, a researcher at the Shanghai Academy of Social Sciences, believes that the free trade zone pilot promotes reform, establishing a set of market access methods that are in line with internationally accepted rules.
In the past, it took months to open a convenience store and obtain permits for various industries. The “one industry, one license” reform in the free trade zone pilot integrates multiple approval items for an industry’s access into a single “industry comprehensive license”, reducing the time limit for approval by nearly 90% and reducing application materials by nearly 70%.
In November 2020, the State Council approved the Shanghai Pudong New Area to launch a pilot reform of “one industry, one license”.
Customs clearance reform has made it more convenient for enterprises. The Shanghai Pilot Free Trade Zone has explored and implemented nearly a hundred innovative measures, such as the “single window” and other internationally advanced trade supervision systems to promote the free flow of goods and services in the zone and establish a “first-line decentralization” that prevails in international free trade zone. The overall customs clearance time of the port has been reduced by more than 50%, and the annual cost is reduced by more than 400 million yuan.
Financial reforms are advancing steadily. In May 2014, a separate accounting system for the free trade pilot was established, and the free trade account was launched, allowing entities in the region to carry out innovative businesses such as investment and financing exchange through the free trade account. In October 2015, with the People’s Bank of China and Shanghai Municipality issuance of the “40 Financial Reform Plan” of the “Further Advancement of the Pilot Free Trade Zone in China (Shanghai) Financial Opening and Innovation Pilot Program to Accelerate the Construction of Shanghai’s International Financial Center,” the financial system innovation framework has started to take shape. The cross-border use of yuan and the innovation of foreign exchange management have been further developed, and a number of international-oriented financial trading platforms have been operating in an orderly manner.
As of the end of 2020, 61 different types of financial institutions have directly connected to the free trade account system, opened 132,000 free trade accounts, and received a total of 2.1 trillion yuan in overseas financing in domestic and foreign currencies.
Lingang Special Area Reach New Heights
Opening-up Expansion and Upgrade
Lingang, facing the ocean, is more than 70 kilometers away from the center of Shanghai. On holidays, tourists crowd the shore of Dishui Lake.
In November 2018, President Xi Jinping announced at the first China International Import Expo that a new area of China’s Shanghai Pilot Free Trade Zone will be added. In August 2019, Lingang Special Area was unveiled. A comment on the new Lingang area was: “Dare to break, dare to try, dare to change.”
Dare to break——investment freedom, the country’s first foreign-controlled joint venture wealth management company Huihua Wealth Management was established; capital freedom, cross-border yuan settlement facilitation, domestic and foreign currency integrated cross-border capital pools and other businesses were successively established; transportation freedom, the first ship “China Yangshan Port” was registered.
Dare to try——introduce talents and reduce the restrictions on review. A series of breakthrough talent policies to continuously optimize the comprehensive environment of talent services. For example, Rongrong New Material Company, located in Lingang Special Area, has a group of industrial workers with low academic qualifications but excellent skills. Not only did Lingang help them settle but also arranged for them to live in public rental housing.
Dare to change——Lingang approved of a new management model where 1,170 decision-making responsibilities at the municipal and district levels were directly delegated to the Lingang level, and many items were reduced to only two levels of approvals compared to the original three to four levels of approvals.
More than a year after its inauguration, a lot of work has been done on its “special functions in the Lingang Special: the initial establishment of an open policy system, the first batch of pioneering models, the first projects, and the first business implementations. The second phase of the Yangshan Special Comprehensive Bonded Zone has also finished. Through this, special economic functions are gradually emerging; construction of frontier industrial clusters with international competitiveness are accelerated, and the focus is turned towards integrated circuits, biomedicine, artificial intelligence, aerospace and other fields. In 2020, Lingang Special Area signed 365 major projects involving an investment of more than 254.238 billion yuan, which equaled to an average of one major project per day.
Zhu Shisong, Member of the Standing Committee of the Shanghai Municipal Party Committee and Management of Lingang Special Area said “Lingang Special Area is serving as a new platform to participate in the allocation of global high-end resources, industrial division of labor and international economic governance, and to better represent the country in international cooperation and competition.