The China (Shanghai) Pilot Free Trade Zone. [Photo/VCG]

After Spring Festival, Zungeru Hydroelectric Power in Nigeria received two special heavy excavators which were manufactured in South Korea and then directly transported to Africa, yet the purchase agreement was signed with Volvo China Headquarters.

Through the whole transaction process, the two excavators never touched Chinese land, but all the profits from the business belong to the China headquarters. This outcome should give credit to "offshore trade" which could not be achieved just one year ago. 

Volvo Cars Group set its China Headquarters in the Jinqiao Development Subzone in China (Shanghai) Pilot Free Trade Zone in 2012. The headquarters were expected to conduct businesses with customers around the world, but, due to the limited supervisions on goods, capital flow and document delivery, could not conduct offshore trade.

Zhan Xu, vice-president of the headquarters, explained that offshore trade settlement had to be conducted by Volvo’s subsidiary in Singapore, causing the headquarters a loss of as much as three billion yuan ($446.68 million) turnover each year. Shanghai also missed about ten billion yuan tax revenue annually. Without offshore trade, the headquarters could not play its due role.

The worries of the enterprises caught the attention of the authorities of the Jinqiao Development Subzone. They started searching for the solution to this bottleneck in 2016 by visiting enterprises and communicating with customs departments, the Bank of China Shanghai Headquarters, and the State Administration of Foreign Exchange Shanghai Sub-office. Finally, a new supervision system for offshore trade was formed in 2018.

Thanks to the Internet of Things technologies, enterprises can collect the data about large-scale machines that are installed with a great number of sensors. With these data, supervision departments can learn about the goods' location and condition without the bother of checking them on the spot. 

The fraud of foreign exchange is a major risk for offshore trade. To make sure the transactions were truly conducted and to prevent fake trade, the banks strengthened investigations of all offshore transactions conducted by all the parties including checks of their records of fund flow, and then submitted reliable reports to the foreign exchange department.

Thanks to the popularization of electronic bills, there is no need to submit paper documents at Shanghai port, as all the related documents can be checked, downloaded and transferred on the Internet.

As the problems were solved, Volvo's headquarters in Shanghai started to engage in import and export trade on a large scale and engaged in offshore trade settlement. In 2018, its turnover reached 1.8 billion yuan, $3 million of which was brought about by offshore trade, a fourfold increase over 2017.

Zhan Xu estimated that if the headquarters deal with all the settlement of overseas businesses, its cross-border turnover is expected to reach two to three billion yuan in 2019, and the turnover of offshore trade to reach $100 million. 

"To tell the truth, the reform is more than we expected and this gives us a lot of confidences for the future," said Zhan.