The English version is for reference only. If there is any inconsistency or conflict between the English and Chinese version, the Chinese version shall prevail.

Establishing the China (Shanghai) Pilot Free Trade Zone (hereinafter the “FTZ”) is a major move and significant effort of the CPC Central Committee and the State Council to promote reform and opening-up under the new situation, through proceeding from domestic and international trends, coordinating domestic and international patterns and following the new trend of a global economy and trade development. The State Administration for Industry and Commerce guides firmly based on the State's strategies the Shanghai administration for industry and commerce to enhance the awareness of reform and to make audacious exploration with a sense of responsibility and courage, and has promulgated the Opinions of the State Administration for Industry and Commerce on Supporting the Construction of the China (Shanghai) Pilot Free Trade Zone (hereinafter the “Opinions”).

I. Guidelines of the Opinions

Holding high the great banner of socialism with Chinese characteristics and guided by Deng Xiaoping’s theories, the important thinking of the “Three Represents” and the Scientific Outlook on Development, the FTZ shall adhere to national strategy, further emancipate minds, make advancement through pilot programs, promote reform and development by opening-up, take the lead in establishing a system of cross-border investment and trade rules which meets the requirements of internationalization and law, become an important carrier for China to further integrate with economic globalization, and develop an updated version of the Chinese economy.

II. Overall Objectives of the Opinions

During two to three years of reform through pilot programs, the FTZ shall accelerate the transformation of government functions and reform and innovate the administrative mode of government. The FTZ shall, through the pilot program of the registration system for registered capital subscription and other registration systems, further ease the restrictions on market participant access, lower access thresholds, improve the business environment, and promote the speedy development of market participants; through the reform of the supervision system, further transform supervision modes, reinforce credit supervision, promote supervision coordination, and improve supervision efficiency; through the reinforcement of publication of market participant information, further expand social supervision, promote social co-governance, inspire the creativity of all kinds of market participants, strengthen the endogenous power of economic development, and promote sustained economic and social health development; and through the simplification of business license formats, satisfy the requirements for linking industrial and commercial registration with the reform of commercial registration rules, and accelerate the connection with international practices.

III. Policy Interpretation of the Opinions

The Opinions provide 9 measures and several opinions in terms of optimizing the business environment, improving administrative efficiency and maintaining market order based on the industrial and commercial administrative functions and in combination with the functional orientation of the FTZ. The main contents are:

(I) Pilot programs of reforming the industrial and commercial registration system to optimize the business environment in the FTZ.

For this section, through full communication and coordination with relevant departments, based on the summary of the experience of commercial registration reform, and in combination with the unified arrangement of the SAIC’s reform of the industrial and commercial registration system, four measures are formed as follows:

1. Pilot program of the subscription registration system for registered capital. Except as otherwise required by any law or administrative regulation regarding the paid-in registration of registered capital of a company, a subscription registration system for registered capital shall be implemented on a trial basis for companies. Upon implementation of this pilot program, in registering the registered capital of a company, the administrative department for industry and commerce shall no longer register the company’s paid-in capital. Except as otherwise required by any law, administrative regulation, or the State Council regarding minimum registered capital in a particular industry, the provisions on minimum registered capital of RMB 30,000 for a limited liability company, RMB 100,000 for a one-person limited liability company, and RMB 5,000,000 for a joint-stock limited company shall be cancelled; and the amount and proportion of initial contributions, the ratio of cash contribution, and the period of contribution shall no longer be limited. This measure realizes the intent for investors to be able to set up companies with “RMB 1” registered capital, further reduce the access threshold, help to improve the investment environment of the FTZ, stimulate new energy for development of corporate enterprises, and fully reflect the concept of “relaxing access restrictions” of the industrial and commercial registration reform.

2. Pilot program of the registration system of “business license before other permits”. Unless any law, administrative regulation, or decision of the State Council requires any prior licensing in enterprise registration, an enterprise in the FTZ may engage in general business operations upon obtaining a business license from the administrative department. If an enterprise intends to engage in any business requiring licensing, there may be two circumstances: Where the business of an enterprise in the FTZ involves any prior licensing in enterprise registration, the enterprise shall apply for a business license to the administrative department for industry and commerce after obtaining a permit or approval document. Where an enterprise applies for engaging in any other business requiring licensing, it may engage in such business only after obtaining a business license and applying to the competent authority for relevant permits or approval documents. The registration system of “business license before other permits” will help enterprise gain qualifications and then apply for business operations with the business license, which is an effective solution to the problem of “which came first, the chicken or the egg” that has been obsessing enterprises for so long. This measure will help to break the predicament of “difficulty in examination and approval”, further lower the access threshold for market participants, and solidly promote the reform of the administrative examination and approval system of all departments.

3. Pilot program of the public disclosure of annual reports. The annual enterprise inspection system shall be replaced with a public disclosure system of annual reports of enterprises in the FTZ on a trial basis, and changes in government administration shall be promoted from focusing on ex ante approval to focusing on interim and ex post regulation. Enterprises shall submit their annual reports to the administrative department for industry and commerce through the market participant credit information publication system during the prescribed period each year, and disclose their annual reports to the public so that all entities and individuals may consult their annual reports. Enterprises shall be responsible for the veracity and legality of their annual reports. Meanwhile, a catalogue of abnormal operations shall be established to record enterprises which fail to publish annual reports during the prescribed period through the market participant credit information publication system. Establishing and improving an enterprise public disclosure system will effectively reveal the true facade of the registration functions, perfect the information disclosure mechanism meeting international rules, and become an important carrier to promote the construction of the social credit system. According to the Measures for Administration of the China (Shanghai) Pilot Free Trade Zone, the measures for the announcement of annual reports of enterprises in the FTZ shall be otherwise formulated.

4. Pilot program of the project recordation system for foreign-invested advertising enterprises. Learning from generally accepted international rules to provide pre-access civil treatment for foreign investment on trial is important content for the establishment of the China (Shanghai) Pilot Free Trade Zone. The Catalogue of Industries for Guiding Foreign Investment (2011 Revision) no longer treats foreign-invested advertising as prohibited or a restricted industry, so the cancellation of restrictions on foreign-invested advertising enterprises is a general trend of development. As a beneficial initiative to transform management modes, the Opinions will implement pilot programs of the project recordation system for foreign-invested advertising enterprises, fully release the access restrictions on foreign-invested advertising enterprises, provide pre-access civil treatment for foreign-invested enterprises applying for advertising business, cancel the restrictions on the qualifications of investors and advertising performance, and cancel the requirements for the term of establishment and operation of the investor and for the registered capital and advertising performance of the foreign-invested advertising enterprise in case of setting up branch offices. At the application, the approval system for foreign-invested advertising enterprise projects in the FTZ and formation of branch offices of foreign-invested advertising enterprise in the FTZ shall be replaced with a recordation system.

(II) Optimization of enterprise formation processes to enhance registration efficiency in the FTZ

This section, with improving registration efficiency as a starting point, further promotes the reform of the administrative approval system in the terms of delegation of the authority of registration, unified business license format and the one-off acceptance of the administration for industry and commerce, and tries to reflect that the policies of the FTZ are reproducible and propagable.

5. The power to administer foreign investment registration vested in the administrative department for industry and commerce in the FTZ. After the establishment of the FTZ, the administrative department for industry and commerce will adjust its organization structuring, and the existing branch of the Shanghai Comprehensive Free Trade Zone shall be changed to the branch of the FTZ. To realize that “matters in the FTZ are settled in the FTZ” and facilitate enterprises in the FTZ to go through registration formalities, and to meet the requirements of the mechanism of “one-off acceptance”, SAIC delegates the authority of approval and registration of foreign-invested enterprises to the administrative department for industry and commerce in the FTZ, making the branch office in the FTZ responsible for the registration, supervision and administration of foreign-invested enterprises which have passed approval (recordation) procedures with the Shanghai Municipal Government or a department authorized by the Shanghai Municipal Government (i.e. the China (Shanghai) Pilot Free Trade Zone Administrative Committee).

6. “One-off acceptance” in the FTZ for enterprise formation. To make things convenient for applicants in the FTZ and improve administrative efficiency, pilot programs of “one-off acceptance” shall be implemented for enterprise formation in the FTZ. “One-off acceptance” shall mean that application materials submitted by the administration for industry and commerce, the Administrative Committee of the FTZ (i.e., the administration for foreign investment examination and approval or filing), and quality and technical supervision and tax authorities will be received by the industrial and commercial administrative authorities in a unified manner, the examination and approval or filing procedures will be completed through circulation among the back offices of the authorities, and then all examination and approval documents or certificates will be issued to the applicant in a unified manner. The enterprise may submit an application via the China Shanghai portal website (www.shanghai.gov.cn) or at the general service hall of the FTZ, and relevant functional departments shall examine the registration application, among which the industrial and commercial administrative authorities shall make a registration decision within 3 working days. Quality and technical supervision and tax authorities shall issue examination and approval documents or certificates within 1 working day after the industrial and commercial administrative authorities make an approval decision. Domestically funded enterprises and such foreign-invested enterprises not listed in the Special Administrative Measures for the Access of Foreign Investment (Negative List) may receive all kinds of certificates including business license, organization code certificate, and tax registration certificate.

7. Pilot program of the new format of business licenses. To match up all pilot measures of the FTZ and highlight the effect of pilot programs in the FTZ, the Opinions will simplify business license format to distinguish enterprises in the FTZ from those outside the FTZ. This opinion specifically contains two points: First, simplifying business license format. Learning from generally accepted international business license formats, the content, color, fonts and other matters of the business license of enterprises in the FTZ shall be distinguished from those of enterprises outside the FTZ. Second, unified business license format. Except for Business Licenses for Specialized Cooperatives of Farmers as Legal Persons and Business Licenses for Individual Industrial and Commercial Households, all business licenses shall adopt the same format, Enterprise Business License. The FTZ business license will be applicable to companies and branches, non-corporate enterprises and their branches, sole proprietorships and their branches, partnerships and their branches, non-corporate Sino-Foreign cooperative joint ventures, foreign enterprises engaging in production and operation activities in China, registered in the FTZ. Except for the company’s paid-in capital that is no longer listed on the business license, other contents of the business license of an enterprise shall remain unchanged.

(III) Transformation of manner of regulation of market participants and maintenance of market order in the FTZ

The reform of the industrial and commercial registration system emphasizes that the administration philosophy shall focus on interim and ex post supervision instead of ex ante approval. Therefore, this section reflects the concept of “strict supervision” in the terms of promoting credit system construction and innovating supervision modes.

8. Reinforcement of publication of credit information and improvement of credit constraint mechanisms. The FTZ shall take the lead in establishing a market participant credit information publication system based on the existing economic residency database of the administrative department for industry and commerce. Through the system, the administrative department for industry and commerce shall publish market participant registration, recordation and regulation information, and enterprises shall publish their annual reports and qualification obtainment information as required. The administrative department for industry and commerce shall regulate the content of such annual reports by means of random inspection, to improve the authenticity and accuracy of the information of the annual reports. Meanwhile, the administrative department for industry and commerce shall take proper credit regulatory measures against enterprises on records of abnormal operations, market participants with lawbreaking records, and their responsible personnel, to form the situation of “one violation of laws results in being constrained everywhere”, increase enterprises’ cost of losing credit, encourage enterprises to conduct business legally, and promote the construction of the social credit system.

9. Innovation in the manner of regulation of market participants to raise the level of agency law enforcement. Based on the actual conditions of the FTZ, the establishment of forms of regulation of market participants compatible with a system of international investment and trade rules shall be explored, and the market regulation and law enforcement of the administrative department for industry and commerce shall be strengthened. The establishment of a centralized and uniform system of market regulation and integrated law enforcement shall be explored, and interdepartmental coordination and cooperation shall be strengthened, to further define the division of labor and cooperation mechanisms of all regulatory departments, improve regulatory efficiency, and jointly create a uniform, open, fair, honest, competitive, and orderly market environment in the FTZ.

Provided by Lawyers Working Committee of Pudong New Area