Brief Introduction To Shanghai Free Trade Zone,Set Up Business,Company Registration,Corporate Formation In Shanghai Free Trade Zone

Introduction

Shanghai Free Trade Zone

The establishment of Shanghai Free Trade Zone (SHFTZ) is major decision made by the Central Committee of the Communist Party of China in response to new challenges posed by the new situation. It is envisioned to explore new paths and accumulate good experience for all-round reform and opening-up.

Officially launched on Sept. 29th 2013, SHFTZ designed a four-pronged institutional innovation strategy targeted at investment management, trade facilitation, financial services and transformation of government functions.

SHFTZ covers an area of 28.78 km2, composed of four customs supervision areas: Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong International Airport Free Trade Zone.

SHFTZ was the very first to act in many groundbreaking projects. It is writing a new chapter for China's opening-up and embarking on a new path for the China’s open economy.

Location

Shanghai Free Trade Zone
The State Council approved the establishment of China (Shanghai) Pilot Free Trade Zone on August 2013 and the FTZ was officially launched on September 29 of the same year by merging four bonded areas under the special administration of Shanghai Customs, namely Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area, and Pudong Airport Free Trade Zone. The 28.78-square-kilometer FTZ is China’s experiment field to test policies for government reform, financial reform, business innovation, foreign investment and tax reform. It also allows Shanghai to vigorously develop re-export trade and offshore businesses.

Shanghai FTZ had registered 23,243 companies by the end of 2014, 14,860 of them newly registered and 2,342 foreign-funded. They generated 16 trillion yuan (US$2.6 trillion) in business revenue in 2014, up 11 percent from the year before. Product sales rose 11.5 percent to 13.8 trillion yuan; earnings of shipping and logistics companies grew 15 percent to 118 billion yuan. Foreign trade totaled 762.3 billion yuan, an increase of 8.3 percent.

Regional advantage

The 10-square-kilometer Waigaoqiao Free Trade Zone, set up in June 1990, was the first free trade zone in China approved by the State Council. After more than 20 years of development, it has attracted tens of thousands of companies, making it the biggest special-administered area under Customs in terms of economic output and range of services. In September 2011, the zone was designated by the Ministry of Commerce as China's first National Model Area for the Promotion of Imports and Innovation. It has become an important trade center in Shanghai, dedicated to building professional trade platforms in 10 categories: liquor, watches, automobiles, engineering machinery, machine tools, medical devices, biomedicine, healthcare products, cosmetics and cultural products. The latter category was accredited by the Ministry of Culture as China's first National Center for Trade in Cultural Products, with trade volume of the products continuing to rise. In 2012, the zone accounted for 43 percent of the watches imported into China, 37 percent of liquor imports and 29 percent of cosmetics. Imports of pharmaceuticals jumped 40 percent to account for 24 percent of the national total, and imports of medical devices rose 29 percent, comprising 21 percent of the national total.

The 1.03-square-kilometer Waigaoqiao Free Trade Logistics Park, set up in December 2003, was the first of its kind approved by the State Council. It was also the first place in the country to run a pilot project of “interactive development,” which allows companies to benefit from the policies and resources of both the free trade zone and the Port of Shanghai. Based those policies and tax rebates, the logistics park and the Waigaoqiao Free Trade Zone create a major center where multinational companies can export and source products in northeastern Asia, and can import non-ferrous metals and information technology components.

The 14.16-square-kilometer Yangshan Free Trade Port, set up in June 2005, was the first free trade port approved by China's State Council. It comprises Little Yangshan Port and the Donghai Bridge connecting the island port to the mainland. The free trade port is a key cornerstone of Shanghai's goal to become a Comprehensive Experimental Zone for International Shipping. The port has attracted companies in industries such as information technology, electronics, automobiles and auto parts, food processing and name-brand clothing. The companies have sited distribution depots in the port and established links with major shipping companies. The port currently is the fastest growing and most profitable of China's 15 free trade ports.

The 3.59-square-kilometer Pudong Airport Free Trade Zone, set up in July 2009, is designed to take advantage of its status as an Asian-Pacific and function as an “experimental area for innovative air services.”

Multinational companies in electronics, medical devices and high-end consumer goods have established distribution centers in the zone and become involved in related financial leasing projects. UPS, DHL and FedEx, the world’s top three express companies, have set up branches in the zone and helped it developed a strong business chain of air freight distribution, financial leasing, express transit and exhibitions of Asia-Pacific trade.

Why register a company in the Shanghai Free Trade Zone?

Registering and locating a WFOE in the Shanghai FTZ offers several advantages. Many of these benefits change over time – one of the main purposes of the Free Trade Zones in China has been to test out new policies and relax regulation, often benefits are offered nationwide after a period of time. We list here some of the most important to consider:

Simpler duty payment and customs

The original incentive of FTZ locations was duty-free importing and warehousing within the zone (with duty paid at the time of onward sale). This is still a major advantage for many companies which can save significant time and money from this. Manufacturing and logistics companies benefit from this, as do importers of goods such as wine.

Reform testing for certain industries

As a testing ground for national policy reforms, new policies are often put in place in a FTZ. These can open up certain previously banned industries to foreign investment. Recent examples of this include the sale of video game consoles and participation in the e-commerce market, which were both initially offered in the Shanghai FTZ before expanding nationwide.

Other specific industries are offered relaxed restrictions too. For example, the legal, medical and insurance sectors are some of the most tightly controlled in China. Yet in the Shanghai FTZ foreign companies are allowed to operate in certain legal areas (albeit at this stage just in partnership with Chinese lawyers). WFOEs are permitted to operate in the medical industry, and are also able to offer insurance services in the marine industry.

Business approval using a “Negative List.”

One of the early changes made by the Chinese government to simplify WFOE setup was the introduction of a so-called “Negative List.” This is used by local government in approving WFOE registrations, with any business not operating in a restricted or banned industry generally being approved (provided other requirements are met of course). At the same time, the industries on the list are being gradually reduced – in 2015, for example, the total restricted industries fell from 190 to 120.

Prior to using this method, a more extensive individual evaluation of proposed business activity was carried out. The Shanghai Free Trade Zone negative list is now being implemented in many other regions of China as well.

Other incentives for faster WFOE registration and setup

When it first started in 2013 one of the key attractions of the Shanghai FTZ to foreign investors was the simpler WFOE setup procedure offered. Shanghai put in place a “5 in 1” single application for five key business licenses and also allowed setup with no prescribed minimum capital amount or injection schedule. These policies have now been applied nationwide. The government’s positive attitude to WFOE setup and commitment to improving the process means that further changes are more than likely in the near future, and these may well be implemented again first via the Shanghai FTZ.

Simpler foreign exchange policies

Companies located in Shanghai FTZ are also freer to convert Renminbi and foreign currency. Accounts are able to receive both Renminbi and foreign currency payments, without approval being needed each time through SAFE (State Administration for Foreign Exchange). Note that this policy is also being expanded nationwide.

Clusters of similar industries and a prestigious location

No matter what financial and regulatory changes come and go for FTZs, one benefit that remains is the specific focus on certain industries. There are advantages for many companies in being located in close proximity to others in their industry. There are also brand and reputation associations that go along with certain regions too – important considerations in Chinese business! Shanghai FTZ offers many different industry clusters. Whilst financial services have been a long time focus, there are also strong groupings in other industries – such as high tech companies, logistics, and medical companies.

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

Contact Tom Lee to incorporate business in Shanghai Pilot Free Trade Zone