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Company Registration in the Shanghai Free Trade Zone, Set Up Business in Shanghai Free
Trade Zone to Enjoy Multiple Incentives, Company Formation One Stop Services in the
Shanghai FTZ

Basic Introduction of Shanghai Pilot Free Trade Zone

Since it was established on September 29, 2013, the China (Shanghai) Pilot Free Trade Zone (FTZ)
has carried out institutional reform and innovation in areas of investment, foreign trade, finance
and post-filing supervision to form a legal framework for investment and trade within the zone. It
has adopted the negative list for investment management, simplified foreign trade supervision
procedures, promoted financial system reform to realize RMB capital account convertibility, and
advocated post-filing supervision as a way to transform government functions.
The State Council decided on December 28, 2014 to introduce the practices of Shanghai FTZ
nationwide and established free trade zones also in Guangdong, Tianjin and Fujian. It approved
the expansion of Shanghai FTZ by incorporating Lujiazui Financial Area, Jinqiao Export Processing
Zone, and Zhangjiang High Tech Park, enlarging the FTZ from 28.78 square kilometers to 120.72
square kilometers to provide more space for reform trials.
1. FTZ Bonded Area (28.78 sq.km.)

The bonded area of Shanghai FTZ consists of Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade
Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Free Trade Zone. Waigaoqiao
Free Trade Zone, founded in 1990, is the first bonded area in China under the supervision of
Shanghai Customs; Waigaoqiao Free Trade Logistics Park, established in 2004, is also the first

bonded logistics park in China; Yangshan Free Trade Port Area, opened in 2005, is the first
bonded port area in China; Pudong Airport Free Trade Zone, set up in 2009, integrates bonded
logistics and cargo shipping. So far, 27 innovative policies that were tested in the FTZ bonded area
have been introduced nationwide or in selected regions. Soon, 28 more policies covering
investment, trade, finance, market opening and supervision will be popularized across the
country. Six innovative practices for the customs and quarantine departments will also be copied
nationwide.
2. Lujiazui Financial Area (34.26 sq.km.)

Lujiazui Financial Area consists of Lujiazui Finance and Trade Zone and Qiantan Area. It is the core
of Shanghai International Financial Center, Shanghai International Shipping Center and Shanghai
International Trade Center. Work is under way to establish a financial system that follow
international rules and practices, attract the headquarters of multinationals with fine services,
and carry out reforms to facilitate foreign investment, cross-border trade, international financing
and market supervision, and create a good legal environment for businesses. Qiantan Area, which
used to be the site of Expo 2010, is a key area for a new round of development in Shanghai and is
positioned as a hub of corporate headquarters, maritime financial services, cultural enterprises,
sports and tourism facilities, and high-end services.
3. Jinqiao Export Processing Zone (20.48 sq.km.)

Established in 1990, Jinqiao Export Processing Zone has become a showcase of advanced
manufacturing, production services, emerging industries, and eco-friendly environment. The
zone is focusing on administrative and financial reforms, creating good business environment to
facilitate trade, and fostering strategic growth industries for sustainable growth and international
competition.
4. Zhangjiang High Tech Park (37.2 sq.km.)

Zhangjiang High Tech Park is a base for innovations as Shanghai implements the national strategy
for sustainable growth. It combines the development of Shanghai FTZ and the Zhangjiang
National Innovation Demonstration Area with a focus on enhancing its innovative capabilities and
providing a service platform for research, financing, talent recruitment and resources sharing.
The expanded Shanghai Free Trade Zone will continue to take the national lead in reform and
innovation, guard against risks in experiments, cater to the needs of enterprises, make good use
of advantages of Pudong New Area, speed up government transformation, make breakthroughs
in reform and opening-up, formulate rules for investment and trade that comply with
international practices, and contribute to the realization of the Chinese Dream of national
rejuvenation.

Since first opening in September 2013, investors and businesses have flocked to the Shanghai FTZ.
According to local media reports, more than 4,600 new companies, including 280
foreign-invested enterprises (FIEs), were established in the Zone as of January 14, 2014. This
surge can be attributed to the Zone’s relaxed requirements and streamlined approval procedures
for company establishment, which we will further describe below.

Relaxed Incorporation Requirements

The Zone cancels out the minimum registration capital of RMB30,000 for limited liability
companies, the RMB100,000 minimum for single shareholder companies, and the RMB5 million
minimum for joint stock companies. Moreover, the Shanghai FTZ has implemented a new capital
registration system under which foreign investors are no longer required to contribute 15-percent
capital within three months and full capital within two years of the FIE’s establishment.
Shareholders of companies established in the Zone may agree upon the contribution amount,
forms, and period of contribution at their own discretion. However, shareholders are still liable
for the authenticity and legality of capital contributions and will be held accountable to the
company within the limits of their respective subscribed capital or shares. The new system has

been proven feasible, with the Zone receiving substantial actual capital contribution in the past
three months, and was rolled out nationwide on March 1, 2014.

Negative List

The Shanghai FTZ adopts a Negative List approach towards foreign investment management,
which specifies restrictions or bans on certain types of foreign investment. Under this approach,
foreign investment projects on the Negative List are subject to pre-approval procedures, while
foreign investors wishing to set up an FIE in a field not listed need only undergo record-filing
procedures with the authorities. The list covers 1,069 businesses in 89 divisions under18
industries, including agriculture, forestry, animal husbandry and fishery; mining; manufacturing;
production and supply industries for power, gas and water; construction; and wholesale and
retail industries.
This is a big step forward compared to the current Foreign Investment Industrial Guidance
Catalogue (positive list) implemented outside of the Zone, under which the procedures for
setting up an FIE are complicated and time consuming, involving verification, approval, and
registration with the National Development and Reform Commission, the Ministry of Commerce,
and the State Administration for Industry and Commerce or their local branches, respectively.

One-stop Application Processing

Similar to procedures for setting up a company elsewhere in China, investors in the Shanghai FTZ
must first carry out a company registration in order to obtain a business license. To unburden

investors from long and tedious administrative approval procedures, the Shanghai FTZ has
established unique to the Zone a “one-stop application processing platform” for company
establishment. Under this platform, all application materials will be submitted and handled
through the industry and commerce authority (AIC) in the Zone. The approval and filing
procedures will be conducted via inter-departmental circulation, after which the various licenses
and certificates (including the business license, enterprise code certificate, and tax registration
certificate) will be issued to the applicant(s) altogether by the AIC. This means applicants may
obtain all necessary documents for company establishment in one place, contrasting with outside
the zone where applicants must run around between different authorities for the issuance of
various certificates. This effectively reduces the time taken to establish a company in the zone.
The one-stop acceptance platform generally works in the same way for both domestic and
foreign investors. The only difference is that foreign investors are required to check their business
scope against the negative list to see which procedure they have to go through. According to the
local government, the business license, enterprise code certificate, and tax registration certificate
can be issued in four working days once an application is accepted. However, due to the large
number of company establishment applications in the zone, the actual process may take more
than a month.

Set up a company in the Shanghai Free-trade Zone and you can take advantage of multiple

incentives offered by the Chinese government in order to attract foreign investors. This is the first
Hong Kong-like free trade area located in mainland China.
This structure is a modern-day option in competition with the UAE Free Trade Zone. It was first
introduced and endorsed by Premier Li Keqiang who stated that it was his desire to the Shanghai
Free Trade Zone Company a shining example of how China can improve its economic structure
and to be competitive with world markets. Many investors have chosen this structure over the
traditional Chinese WFOE (Wholly Foreign Owned Enterprise).
The significant benefit of this innovation is that it encourages foreign investment. Moreover, it is
possible for foreign businesses to open a Limited Company Shanghai’s Free Trade Zone without
real capital requirements. That is, unlike many other jurisdictions, such as Germany, that require
significant capital outlays to form companies, the upfront cost is substantially reduced.

The zone covers about 120 square kilometers, or approximately 46.61 square miles, and includes
four currently recognized bonded zones in the district of Pudong.
The zone has set out to test a number of reforms. The sale of video game consoles, formerly
banned, are allowed in the zone as of this writing. Consoles and games are approved on a
case-by-case basis as approved by the Shanghai Municipal Administration of Culture, Radio, Film
& TV. The zone still has restricted Internet access as does the rest of China.
There are no stamp duties or customs that would normally be imposed on commodities. This has
given a significant boost to the wine industry in China because importers have much greater
freedom.
This zone provides a number of reforms to attract foreign investors. There are lists of service
industries that have significantly relaxes policies operating in the zone, including (as of this
writing) medical services, ocean freight, international ship management, value-added telecom
and banking.
One more feature is the “negative list.” This means the business is generally allowed in all sectors
unless that type of business is prohibited by inclusion on the Negative List published by the
Shanghai Municipal Government. The following business sectors are restricted or prohibited for
foreign investment as of this writing:
• Agriculture, forestry, animal husbandry and fishery
• Mining
• Manufacturing
• Production and supply of power, gas and water
• Construction
• Wholesale and retail
• Transportation, warehousing and postal services
• Information transmission, computer services and software
• Finance
• Real estate
• Leasing and commercial services
• Scientific research and technical services

• Water conservancy, environmental, and public facilities management
• Education
• Health and Social Industries
• Cultural, sports and entertainment industries
Provisions further relaxing restrictions on foreign investment in the financial industry,
manufacturing, and transportation service have also been included. Shanghai Free-trade Zone is
a portal for easy, low-cost and fast entry for foreigners into the Chinese market.
Legal system in the Zone

The recent split from the China International Economic and Trade Arbitration Commission
(CIETAC) by its Shanghai Branch, leading to the creation of the Shanghai International Arbitration
Commission (SHIAC), has enabled the legal system in the Shanghai Free Trade Zone to reform
itself more deeply and rapidly than in the rest of China. It has recently released a new set of
arbitration rules, aiming at aligning the SHIAC standards with the internationally used ones in the
domain of Alternative Dispute Resolutions (ADR). These reforms should further structure and
clarify dispute resolution processes.

Since Shanghai Pilot Free Trade Zone was established on September 29, 2013, Tommy China
Business Consulting has been focusing on consulting services for our clients to set up business in
Shanghai Pilot Free Trade Zone, we offer one stop services for Shanghai Free Trade Zone company
formation include:
Business Registration in Shanghai FTZ

-- Virtual registered address in FTZ
-- Human Resources
-- China VISA Services
-- Accounting and Tax Compliance Services
-- FTA Bank Account Opening
Please visit http://www.tommyconsulting.com/
Email: tomlee@tommyconsulting.com, Skype: tomleeli
WhatSapp/Wechat/Cell Phone: +86 18926401128


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