2014-15 Canada-China Business Forum Magazine | Page 24
TRADE
Triumphs, Lessons &
the Way Forward
Yet neither structural change nor increased
liberalization is new to the Chinese. It takes the
Chinese a long time to decide on the “deepwater
reforms” under the context of liberalization because
the Central government is very concerned about the
risks associated with reforms. Therefore, the Central
government selected Shanghai, which has a more
established trade and financial service industry, as a
test site to experiment with the long-awaited reforms.
The FTZ is small enough to contain risks if they get
out of hand.
After three months of fierce debate within the Central
government, blueprints for the China (Shanghai)
Pilot FTZ were released on September 27, 2013. The
blueprint mapped ambitious reforms in the following
six areas:
•
Pre-citizen treatment to foreign
investment and negative list
•
Developing new trade modes to introduce
offshore trade and future trade
•
Financial liberalization, interest rate
marketization, exchange rate liberalization,
RMB internationalization and relaxing
controls on capital accounts
•
Relaxing restrictions on service sectors
involved in professional education, medical
care, entertainment and tourism
•
Building up a transparent and fair legal system to
replace the existing instructions from government,
which are believed to biased towards SOE’s
by/par BO CHEN
Photo by Konrad Shek
T
he decision to establish a pilot free trade zone (FTZ) in
Shanghai stems from a number of internal and external
problems that China now faces. China’s economic slowdown
problem is widely believed to be symptomatic of the middleincome trap. It would require painful structural changes in order
to avoid the trap. So-called high-quality international free trade
and investment agreements such as Trans-Pacific Partnership
(TPP), Trade in Services Agreement (TISA) as well as various
Bilateral Investment Treaty (BIT) negotiations have pushed China
to become more liberalized toward the rest of the world.
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can be unloaded immediately into the FTZ while
applying for import permits into China. Furthermore,
tariffs on imports stored for future deliveries are
waived. Together with China’s financial liberalization,
administrative reforms are expected to boost China’s
offshore trade.
Enhancing the efficiency in
government administration, from
approval system to filing system
•
hxdbzxy/Shutterstock
Shanghai
Free Trade Zone:
Changes and easing of rules have been made in the
service sector. Foreign entertainment companies can
either find a Chinese partner or can seek to establish an
independent entity in the FTZ. Some of their business
activities can be promoted in the whole Shanghai
region. The first foreign-owned international school,
the London-based Harrow School, is opening a campus
in the FTZ. A high-end German hospital has been
approved to operate soon. Although located in the
Zone, these businesses can serve all of Shanghai.
The introduction of an applicable negative list and
concrete steps towards financial liberalization are the
two most important and attractive reforms found in the
Zone. This view has also been confirmed in a recent
speech by Han Zheng, Secretary of the Shanghai
Municipal Committee of the CPC. Despite public
pronouncements, reforms in these two areas have been
below the market expectations. In September 2013,
China announced its first negative list on foreign entry
into the Zone. However, the 2013 list mirrored existing
regulations stipulated by the National Development
and Reform Committee. There was little to test or to
experiment within the 2013 negative list. The Central
government quickly announced that they would
Although it is still too early to evaluate the whole
reform process in full, nevertheless, we can examine
some midterm triumphs by checking the progress in
the six areas of reform.
Important reforms have been made in government
administration. For instance, it now takes three to
five business days to start up a business in the FTZ
compared to three to six months in the past. Chinese
customs has also rela ᕐ