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City's FTZ opens up to foreigners
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CHINA has removed a number of regulatory constraints on foreign investment in Shanghai’s free trade zone in industries from green tea to airplane engine parts.
A central government statement issued ahead of the zone’s first anniversary today said the State Council had approved the temporary removal of restrictions affecting 27 industries. It did not specify what it meant by temporary.
Some of the limits on industry investment by foreign companies in joint ventures with Chinese firms will go from 49 percent to 51 percent or greater, the statement said.
In some industries, such as companies developing high-speed rail technology, passenger trains, yachts and luxury liners, sole foreign ownership will be allowed, whereas elsewhere in China a local partner is required.
Foreign companies producing traditional Chinese tea will be allowed in the zone under joint ventures, something not allowed elsewhere, the statement said.
The changes will, for the first time, allow foreign-owned companies to operate international maritime cargo handling, international maritime container freight stations and container yard businesses. Foreign investors will be allowed to hold a 51 percent stake in international shipping agencies, up from 49 percent previously.
Ownership restrictions were lifted to allow foreign-owned large-scale crane and motorcycle manufacturers, as well as aviation engine parts design, manufacturing and maintenance firms.
Foreign investors will also be able to set up wholly owned salt wholesalers.
Sino-foreign joint ventures will be allowed in the retail and distribution of a variety of other commodities, including vegetable oil, sugar and cotton.
The changes are set to open China’s services sector wider after a first batch of 23 measures earlier this year offered more room for foreign participation.
As of September 15, there were 1,677 foreign-funded firms among the 12,266 new enterprises in the zone.
There has been some “criticism” that financial reform in the zone has lagged behind reform in trade and investment.
Zhang Xin, deputy director of the Shanghai headquarters of the People’s Bank of China, told reporters yesterday that the central bank would be accelerating the pace of financial reforms in the zone but would remain cautious about applying them nationwide.
“A framework for financial reform in the zone has come into shape after one year of operation and related businesses such as the foreign-currency interest rate liberalization and cross-border use of yuan are progressing smoothly,” Zhang said.
“I think the priority now is to deepen these achievements because the spread of financial reforms requires higher risk management capability compared with that in trade and investment areas,” he added.
Launching foreign-currency business under the free trade account by the end of the year and allowing overseas investment by individuals based in the zone are among the focus of future reforms, Zhang said.
By the end of August, the number of financial institutions in the zone licensed by the People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission reached 87, compared to 10 before the zone was established.
They include 15 Chinese banks, 23 foreign banks, 13 insurance companies, and 17 payment and settlement institutions.
The number of financial intermediaries was 453 — 296 financial leasing companies and 157 are private equity firms.
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