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 referred to as “FTZ”) is a major decision of the CPC Central Committee and the State Council and a major move for thoroughly implementing the spirit of the 18th National Congress of the CPC and promoting the reform and opening-up under the new situation. This Framework Plan is developed for the purpose of comprehensively and effectively boosting work on the FTZ.

General requirements

With the important mission to accelerate the transformation of government functions, actively explore innovation in management modes, and promote trade and investment facilitation in a new China era and explore new channels and accumulate new experience for the deepening of reform and expansion of opening-up on a full scale, the FTZ a requirement of national strategy.

Guidelines.

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 into economic globalization, develop an updated version of the Chinese economy, and contribute to the realization of China’s dream of great renascence.

Overall objectives.

During two to three years of reform through pilot programs, the FTZ shall accelerate the transformation of government functions, actively promote the expansion of opening-up of the service industry and reform of the foreign investment management system, vigorously develop the central economy and new trade forms, accelerate the exploration of convertibility under capital accounts and full opening-up of the financial service industry, explore the establishment of a categorized regulation mode based on the status of goods, strive to form a policy support system promoting investment and innovation, pay particular attention to cultivating an internationalized and regulated business environment, strive to become a pilot free trade zone meeting international standards and featuring investment and trade facilitation, free convertibility of currencies, efficient and convenient regulation, and satisfactory legal environment, and explore new ideas and new channels for furthering opening-up and reform in China and better serving the whole country.

Scope of implementation.

The FTZ covers four areas under special customs supervision: Shanghai Waigaoqiao Free Trade Zone, Shanghai Waigaoqiao Bonded Logistics Park, Yangshan Free Trade Port Area, and Shanghai Pudong Airport Free Trade Zone, and the scope of implementation and the scope of policies for pilot programs will be gradually expanded according to the progress of pilot programs and the needs for industry development and generation of a ripple effect, so as to form an interactive mechanism building Shanghai into a center of international economy, a center of finance, a center of trade, and a center of shipping.

Major tasks and measures

Adhering to the strategic requirement of “opening to the whole world and serving the whole country” and the strategic task of building Shanghai into “four centers,” the FTZ shall, through pilot programs, risk control, progressive advancement, and gradual improvement, combine the expansion of opening-up with system reform and combine the cultivation of functions with policy innovations, so as to form a framework of fundamental rules compatible with generally accepted international rules for investment and trade.

Accelerating the transformation of government functions.

1. Deepening the reform of administrative systems. Efforts shall be made to accelerate the transformation of government functions, reform and innovate the administrative mode of government, actively explore and establish an administrative system compatible with the international high-standard system of investment and trade rules according to the requirements of internationalization and law, and promote changes in administration from focusing on ex ante approval to focusing on interim and ex post regulation. The FTZ shall establish a service mode featuring “one-off acceptance, integrated approval, and efficient operation,” improve information network platforms, and realize a coordinated management mechanism among different departments. The FTZ shall establish a comprehensive assessment mechanism for tracking, regulating and gathering industry information, and enhance the tracking, administration and supervision of the whole process of business activities outside the FTZ of enterprises registered in the FTZ. The FTZ shall establish a centralized and uniform system of market regulation and integrated law enforcement to realize efficient supervision in fields such as quality and technical regulation, food and drug regulation, intellectual property rights, industry and commerce, and taxation, and encourage the involvement of social forces in market supervision. The FTZ shall enhance the transparency of administration, and improve an information disclosure mechanism that values participation of investors and conforms to international rules. The FTZ shall improve the mechanism for effectively protecting the rights and interests of investors, ensure fair competition among various investors, and allow qualified foreign investors to freely transfer their investment returns. Dispute resolution mechanisms for intellectual property rights, such as mediation and aid, shall be established.

Expanding the opening-up of investment fields.

2. Expanding the opening-up of the service industry. The fields of financial services, shipping services, commerce and trade services, professional services, cultural services, and social services shall be selected for expanded opening-up (see Annex for a detailed list of opening-up), and access restriction measures (except for banking institutions and information and communication services), such as investors’ qualifications, equity ratio restrictions, and restrictions on business scope, shall be suspended or cancelled, so as to create a market environment favorable to the equal access of various investors.

3. Exploring and establishing a “negative list” administrative mode. The FTZ shall, learning from generally accepted international rules, provide pre-access national treatment for foreign investment on a trial basis, research and develop a negative list for foreign investment in the FTZ inconsistent with national treatment, and reform the administrative mode of foreign investment. For fields outside the negative list, under the principle of consistency in policies for both foreign-invested enterprises and domestic enterprises, the approval system for foreign-invested projects shall be replaced with the recordation system (unless the State Council reserves the approval requirement for domestic investment projects), and the Shanghai Municipal People’s Government shall be responsible for recordation administration; the approval of contracts and bylaws of foreign-invested enterprises shall be replaced with recordation administration by the Shanghai Municipal People’s Government, and relevant formalities after recordation shall be undergone according to the relevant provisions in China; the industrial and commercial registration shall be linked with the reform of the commercial registration rules, and the registration process shall be gradually optimized; the national security review system shall be improved, and a pilot program of national security review related to foreign investment shall be implemented in the FTZ to build a safe and efficient open economic system. A foreign investment administrative system in line with international standards shall be gradually formed on the basis of experience from pilot programs.

4. Building an overseas investment promotion system. The FTZ shall reform the overseas investment administration mode, apply primarily the filing system to overseas investment, and apply the filing system to general overseas investment projects, and the Shanghai Municipal People’s Government shall be responsible for recordation administration, so as to improve facilitation of overseas investment. The FTZ shall innovate in the investment service promotion mechanism, strengthen the ex post administration and services regarding overseas investment, form an information monitoring platform shared by multiple departments, and effectively conduct the statistics and annual inspection of direct overseas investment. Various investors in the FTZ shall be supported in making overseas investment in multiple forms. The formation of professional project companies to make overseas equity investment shall be encouraged in the FTZ, and qualified investors shall be supported in establishing a fund of funds for offshore equity investment.

Promoting the transformation of trade development modes.

5. Promoting the transformation and upgrading of trade. The FTZ shall actively cultivate new trade forms and functions to form new competitive advantages in foreign trade focusing on technology, brand, quality and service and accelerate the rise of China in the global trade value chain. Multinational companies shall be encouraged to establish Asian-Pacific regional headquarters and operation centers integrating trade, logistics, settlement, and other functions. The pilot program of the international trade settlement center shall be further implemented to expand the functions of special accounts in cross-border receipt and payment and financing under trade in services. Enterprises in the FTZ shall be supported in the development of offshore business. Enterprises shall be encouraged to conduct international and domestic trade according to an overall plan to realize the integrated development of domestic and foreign trade. Efforts shall be made to explore the establishment of international bulk commodity trading and resource allocation platforms in the FTZ for the international trade of energy products, basic industrial raw materials, and bulk agricultural products. The pilot program of futures bonded delivery shall be expanded and improved to expand warehouse receipt pledge financing and other functions. The construction of an international cultural trade base shall be accelerated. The development of outsourcing services in biological medicine, software information, management consulting, and data services, among others, shall be promoted. Various financial leasing companies shall be allowed and encouraged to establish project subsidiaries in the FTZ to provide domestic and foreign leasing services. The establishment of third-party inspection and identification institutions shall be encouraged, and their test results shall be accepted according to international standards. Pilot programs of domestic and foreign high-tech and high value-added maintenance services shall be implemented. The FTZ shall accelerate the cultivation of cross-border e-commerce service functions, and implement pilot programs to establish corresponding support systems in Customs supervision, inspection and quarantine, tax rebate, cross-border payment, and logistics, among others.

6. Enhancing the level of international shipping services. The FTZ shall maximize the interactive roles of the Waigaoqiao Port, Yangshan Deepwater Port, and Pudong International Airport, and explore how to form an internationally competitive shipping development system and operation mode. The FTZ shall actively develop shipping finance, international ship transportation, international ship management, international shipping brokerage, and other industries. The development of the shipping freight index derivatives trading business shall be accelerated. The development of transit and LCL (less than container load) business shall be promoted, ships not flying five-star flags which are owned or controlled by Chinese-invested companies shall be allowed to engage in the coastal carriage of foreign trade import and export containers between domestic coastal ports and the Shanghai Port on a trial basis. The Pudong airport shall be supported in increasing international flights for cargo transit. The FTZ shall maximize the regional advantages of Shanghai, and using preferential tax policies for Chinese-funded ships flying a “flag of convenience” to encourage qualified ships to register in Shanghai. The international ship registration policies already implemented in a pilot program in Tianjin shall be implemented in the FTZ. The international shipping business licensing procedures shall be simplified to form an efficient ship registry system.

Deepening opening-up and innovations in the financial field.

7. Accelerating innovation in the financial system. Conditioned upon controllable risks, pilot programs may be implemented for RMB convertibility under capital accounts, interest rate liberalization in the financial market, and RMB cross-border use, among others, in the FTZ. Liberalization of pricing on the assets side of financial institutions shall be achieved in the FTZ. Efforts shall be made to explore the reform of foreign exchange administration with an international angle and to establish a foreign exchange administrative system adapted to the FTZ to comprehensively achieve trade and investment facilitation. Enterprises shall be encouraged to make full use of both domestic and foreign resources and markets to achieve liberalization of cross-border financing. The foreign debt administration mode shall be further reformed to promote cross-border financing facilitation. The pilot program of centralized use and management of foreign exchange funds of headquarters of multinational companies shall be further implemented, and multinational companies shall be encouraged to establish regional or global fund management centers. Efforts shall be made to establish a mechanism for the interaction between financial reforms and innovation in the FTZ and the construction of the Shanghai international financial center.

8. Enhancing financial service functions. The FTZ shall promote the full opening-up of the financial services industry to qualified private capital and foreign-invested financial institutions, and support the formation of foreign-invested banks and Chinese-Foreign equity joint venture banks in the FTZ. The financial market shall be allowed to establish international trading platforms in the FTZ. Overseas enterprises shall be gradually allowed to participate in commodity futures trading. Product innovation in the financial market shall be encouraged. Equity trust trading institutions shall be supported in establishing integrated financial service platforms in the FTZ. The cross-border RMB reinsurance business shall be supported to foster and develop the reinsurance market.

Improving rules in the legal system.

9. Improving legal guarantees. The formation of a high-standard system of investment and trade rules meeting the needs of development of the FTZ shall be accelerated. In view of the contents of pilot programs, if the implementation of certain provisions of the relevant administrative regulations and documents of the State Council should be suspended, the prescribed procedures shall be followed. In particular, the relevant administrative approval items prescribed in the Law of the People’s Republic of China on Foreign-Invested Enterprises, the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures, and the Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures shall be temporarily adjusted, and such adjustments shall be put into trial implementation during the three years from October 1, 2013. All departments shall provide support for the FTZ to further implement pilot reform programs regarding the expansion of opening-up of the service industry, application of pre-access national treatment and negative list administrative mode, among others, and address issues on legal guarantee in implementing pilot programs in a timely manner. The Shanghai Municipal People’s Government shall, through local legislation, establish administrative rules for the FTZ meeting the requirements of pilot programs.

Creating a corresponding legal environment for regulation and taxation

To meet the requirements for establishing a high-standard international investment and trade service system, efforts shall be made to innovate regulatory modes, promote the free movement of goods, services, and other various elements in the FTZ, boost the expansion of opening-up of the service industry and further development of trade in goods, and the forming of open and transparent administrative rules. Under the premise of maintaining the fairness, unity and standardization of the existing tax system, the relevant policies shall be improved based on functional cultivation.

Innovating supervision service modes.

Promoting the “release of the first line”. Enterprises shall be allowed to directly carry goods into the FTZ based on import manifests, and then undergo declaration formalities with the competent Customs authority based on the recordation list of imported goods. Efforts shall be made to explore the simplification of the entry and exit recordation lists and the entry and exit formalities for international transit, LCL, split shipping, and other business. The mode of “entry quarantine and properly relaxed import and export inspection” shall apply, and innovation shall be made in the regulatory techniques and methods. The FTZ shall explore the establishment of a relatively independent area for trade in goods focusing on trade facilitation and an area for trade in services focusing on the expansion of opening-up of the service field. Conditioned upon ensuring effective regulation, the FTZ shall explore the establishment of a model of categorized regulation according to the status of goods. Function expansion shall be further conducted, and bonded exhibition and trading platforms shall be allowed to be set up in particular areas under the premise of strict implementation of tax policies for import and export of goods.

Resolutely exercising “safe and efficient control over the second line”. Efforts shall be made to optimize the administration of checkpoints, enhance the electronic information networking, strengthen regulation through the crosschecking of entry and exit lists, account book management, cargo verification and endorsement at checkpoints, and risk analysis, among others, to promote the connection between the regulatory models for the first and second lines, and apply the inspection and quarantine regulatory model of “easy entry and exit but with strict control of quality and safety risks”. The management of electronic account books shall be strengthened to promote the convenient and fast movement of goods in the FTZ between areas under special customs supervision and across different Customs territories. Enterprises in the FTZ are generally not subject to geographic restrictions, and may make re-investment or conduct business outside of the FTZ, but shall undergo the relevant formalities as required by any special provisions. The connection of the business operation information of enterprises and the regulatory system shall be boosted. Effective regulation shall be implemented through risk monitoring, third-party management, and security deposit requirements and the role of the construction of Shanghai’s integrity system shall be maximized, to accelerate the formation of the rules for enterprise business integrity management and exclusive jurisdiction over their business activities.

Further strengthening regulatory cooperation. The collaboration between relevant departments and the Shanghai Municipal People’s Government shall be strengthened under the principle of effectively safeguarding national security and fair market competition to improve the service guarantee for maintaining economic and social security. The FTZ shall assist the relevant departments of the State Council in strictly implementing anti-monopoly examination regarding business concentration. Cooperation with the administrative departments of Customs, quality inspection, industry and commerce, taxation, and foreign exchange, among others, shall be strengthened. The improvement of the integrated regulatory model shall be accelerated, and the establishment of a unified and efficient port regulation institution shall be boosted. The FTZ shall explore unified electronic fence management, and establish a Customs supervision mechanism with controllable risks.

Exploring supporting tax policies for the FTZ.

Implementing tax policies promoting investment. For enterprises registered in the FTZ or individual shareholders, the income tax on the appraised asset appreciation arising from external investment of non-monetary assets and other asset restructurings may be paid by installments over five years. For the rewards granted by enterprises in the FTZ to their high-end talents and much-needed talents in a form such as shares or a percentage of capital contribution, the policy of payment of individual income tax on equity incentives installments as tested in Zhongguancun and other areas shall apply.

Implementing tax policies promoting trade. Financial leasing enterprises registered in the FTZ or project subsidiaries established in the FTZ by financial leasing companies shall be covered by the pilot program of export tax rebate for finance leasing. Domestic leasing companies registered in the FTZ or project subsidiaries established in the FTZ by leasing companies shall enjoy relevant preferential import VAT policies for airplanes with an empty weight of 25 tons or more purchased abroad with the approval of the relevant authorities of the State and leased to domestic airline companies by them. For goods produced or processed by enterprises established in the FTZ and sold domestically through the “second line,” the import VAT and consumption tax shall be levied as legally required. Upon application of enterprises, the policy of levying Customs duties on goods for domestic sale according to the imported materials or parts or according to the actual inspection declaration status shall be implemented on a trial basis. Under the current policy framework, necessary goods such as machines and other equipment imported by production enterprises and producer service enterprises in the FTZ shall be exempted from import tax, except for goods imported by life service enterprises and other enterprises and goods which may not enjoy tax exemption as specified in the laws, administrative regulations and other relevant provisions. The pilot policy of tax rebate at the port of departure shall be improved, and the expansion of the coverage of pilot programs for places of departure, carriers, and means of transport, among others, shall be researched in a timely manner.

In addition, conditioned upon consistency with the direction of tax reform and international practice and prevention of transfer of profits and erosion of the tax base, tax policies adapted to boost the development of overseas equity investment and offshore business shall be researched and improved.

IV. Solidly conducting organization and implementation

The State Council shall make overall arrangements to lead and coordinate work on the FTZ. The Shanghai Municipal People’s Government shall elaborately organize implementation, improve working mechanisms, assign working responsibilities, and, according to the targets and pilot programs specified in the Framework Plan and the requirements of “implementing those with mature conditions with gradual improvement,” develop operable specific plans, speed up implementation, carefully study new situations and solve new problems during implementation, and report any major issues to the State Council in a timely manner for instructions. All relevant departments shall provide strong support, and actively conduct coordination, cooperation, guidance, assessment, and other work to jointly promote innovation in relevant systems, mechanisms, and policies and effectively build and administer the FTZ.

Attachment: Measures for the Expansion of Opening-Up of the Service Industry in the China (Shanghai) Pilot Free Trade Zone

Attachment

Measures for the Expansion of Opening-Up of the Service Industry in the China (Shanghai) Pilot Free Trade Zone

Financial services field

Shipping service field

Commerce and trade service field

Professional service field

Cultural services field

Social services field

Note: The above opening-up measures shall only apply to enterprises registered in the China (Shanghai) Pilot Free Trade Zone.

Provided by Lawyers Working Committee of Pudong New Area.