China has designated an special area in Shanghai that allows unconventional reforms. The free trade zone is considered a major milestone in the nation’s commitment to open more to world markets. A year has passed since the zone was established and it still aims to pioneer innovative ideas to nurture China's global competitiveness.
The Trans-Pacific Partnership known as TPP began in 2005 and it’s become the new trade rule shared by the international community. More than 70 countries have signed the agreement. But China is not among them.
That’s because China is faced with the problem of how to connect with the international rules of investment and trade while also having to upgrade the country’s management system.
All of those urgent needs contributed to China’s first pilot area -- the Shanghai Free Trade Zone…
On September 29th, the area will be officially designated as the pilot area for making all of the changes anticipated by the outside world.
"We will pay special attention to the pilot area. We will support the revolution of the management system in regards to foreign investment," Liu Yajun, director of Commerce Ministry Foreign Investment Dept., said.
The country’s first negative list was among the first tryouts.
"The list is a new management approach. Most of the foreign investors no longer need to wait for approval. There are more than one thousand foreign investment companies in the free trade zone since the release of the list. Over 91.2 percent of them didn’t go through the approval process," Gu Honghui, deputy director of Shanghai Dev’t And Reform Committee, said.
The second version of the list was released nine months later and it opened up 31 more areas.
The free trade account was launched by China’s Central Bank. Like a highway, the free trade account connects the pilot area with rest of the world. But instead of cars running in high speed, this highway is all about currency.
"To companies inside the pilot area, the free trade account allows them to seize the chance of making investments outside the country. The account also allows foreign investment services groups to bring good products to the companies inside the pilot area," Zhang Xin, head of People’s Bank Of China, Shanghai Branch, said.
Meanwhile, importing and exporting becomes much easier with the launch of the single window mechanism.
"The single window platform combines customs, industry and commerce, taxation , foreign exchange and inspection and quarantine all together. All companies involved will be allowed to submit the required documents and make necessary declarations on an online platform. Then all of the information will be distributed by this system to other relevant agencies," Huang Shengqiang, head of Single Window Trial Program, said.
There are many other tryouts and some new ones are still underway…Experts say there are many reasons to believe the pilot area will play an important role for China in unleashing its development potential.
Walking though this door, you’ll be able to find bold ideas and lots of tryouts, from administrative management to trade, from the financial sector to foreign investment. Each step will be connected in the future so as to help make China become a open, fair and innovative playing field and welcome more international players.
There is one list that can end the red tape in a test area in China. Fifty-four industries have opened its access to foreign-funded companies in the past year. But a list was established inside the free trade zone in Shanghai that tells companies what they can’t do rather than what they can do.
Working in a foreign-funded shipping company, Zhou Xianyong has always wanted to start his own business in China. But he hasn’t seen any chance for the past two decades. Until now. The pilot area in Shanghai gives him hope.
"To us, we think it is a good opportunity. We all are looking forward to this chance because of the huge market in China. Also, I think our service industry should connect with the world. Otherwise it will hamper the speed of development of Shanghai’s goal of building its shipping center," Zhou said.
The new rule in the free trade trade zone is to set up a negative list that is an innovative management approach that opens any sector that isn’t off-limits. Zhou’s company makes a request to ask for additional openings in the shipping industry.
Their request, however, became a headache for the government when it was collecting suggestions and advice from the companies in all fields.
"The shipping industry is one of the first places where we step out to the outside world. We’ve made a lot of tryouts. The negative list requests all industries to further open up themselves. It is quite difficult for us to make a big step based on the work we’ve done in the past years," Zhang Lin, Deputy Director of Shanghai Traffic Committee, said.
The eagerly first version of negative list was released…but Zhou was quite disappointed to see his company’s request not included.
But the revolution still carries on and nine months later, the second version of the list was released. Zhou was happy to see his industry partially included.
The second day after release of the list, Zhou filed a report to his headquarters in Singapore about possible future investments. And he is hoping for more in the coming days.
Nine months after the release of the first list, there are about one thousand foreign funded companies registered in the free trade zone. More than two hundred foreign funded programs are also in the pilot area. The list is a sign of the government’s determination to adjust itself and open up more to the outside world.