Shanghai free trade zone

With a double-digit growth in 2013, China is one of the most flourishing areas for Retailers in the world. According to the Ministry of Commerce (MOFCOM), it’s currently the world’s second largest retail market after the USA. Fuelled by an increase in household incomes,it's expected to become the world’s largest retail market by 2016.

Shanghai is the commercial and financial center of mainland China. In 2013, 62.2% of its Gross Domestic Product (GDP) was concentrated on services sectors. Among them, Retail & Wholesale is one of the top 3 largest industries.

China's state council approved in August 2013 the establisment of a Free-trade zone in Shanghai. It's the first Hong Kong-like free trade area in mainland China. The zones covers an area of 28,7 square kilometers, located in the city's Pudong New Area. It's composed by 4 special customs zones in Shanghai:

  • Waigaoqiao Bonded Zone
  • Waigaoqiao Bonded Logistics Park
  • Comprehensive Bonded Zone in Pudong Airport
  • Yangshan Bonded Port Area

Foreign businesses are regulated by the Ministry of Commerce (MOC) under the Catalogue for the Guidance of Foreign Investment. This catalogue categorises business activities into 4 groups: Encouraged, Permitted, Restricted and Prohibited. Company established in this area are only subject to the Prohibited list related to this zone. An activity is allowed as long as it is not classified as “prohibited”. Each group includes a list of the sectors and the legal structures required in each case: some of the activities require a joint venture, some limit the maximum percentage of shares held by the foreign partner, whilst others can be engaged through a 100% foreign owned company.

Before

After

Permitted business scope for foreign investors is governed by catalogue of foreign investment applicable on national basis

Any industry not included in the negative list are allowed to set up in the Zone

Process of setting up a business depends on many factors which might not be in the control of the foreign investors

Promise to speed up the process of setting up a business in the Zone

Exchange of RMB is restricted 

Free exchange of RMB may be possible

Capital account is not open

Consideration to open capital account in discussion

No income tax preferences

Some income tax preferences may be proposed

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