The Chinese government announced a series of measures to promote a favorable environment for foreign businesses and to reiterate its ongoing commitment to further open its economy by reducing barriers and enhancing efficiency in six Free Trade Zones and Free Trade Ports (FTZ and FTP).
These six regions, Shanghai, Guangdong, Tianjin, Fujian, Beijing, and Hainan will be subject to a range of international trade regulations and will serve as experimental grounds for testing and implementing innovative policies and reforms to promote international trade and investment.
The goal of this initiative is to attract foreign businesses, investors, and talent, while developing the growth of domestic industries and boosting overall economic productivity.
The document, published last June by the State Council, is called the Notice Regarding the Implementation of Several Measures to Promote Institutionalized Opening-Up of Qualified Free Trade Pilot Zones and Free Trade Port in Accordance with International High Standards (FTZ Opening-Up Measures).
China has a total of 21 free trade zones and ports, however the six eligible FTZs and FTPs are Shanghai FTZ, Guangdong FTZ, Tianjin FTZ, Fujian FTZ, Beijing FTZ, and Hainan FTP. These areas, strategically located, implement innovative policies and reforms to promote international trade and investment.
Six key aspects to encourage international trade are addressed by the document, which includes 33 important items.
The FTZ Opening-Up Measures introduce trials for remanufactured products in key industries, temporary duty exemptions for aircraft and ships temporarily exported for repair, customs duties exemption for goods temporarily imported for repair, and preferential treatment for selected imported goods.
According to the document, foreign financial institutions will be able to offer services similar to their Chinese counterparts and will receive equal treatment. Personnel, senior professionals, and family members will enjoy easy entry and stay in these regions.
These pilot zones, with their strategic locations and large consumer markets, represent an attractive investment opportunity for international institutions. The measures align trade practices with international standards, foster cooperation, and contribute to China’s economic integration into the global marketplace.
The FTZ Opening-Up Measures states that certain goods imported to the pilot regions are eligible for exemption from import duties, import value-added tax, and consumption tax. These goods serve specific purposes and must be re-exported within six months from the date of importation. However, if it is necessary to extend the time limit for re-shipment out of the country, the extension formalities should be followed in accordance with the regulations.
Among the eligible goods are professional equipment necessary for business, trade, or professional activities, including software, instruments, equipment, and supplies used for news reporting, film, and television production; goods used for exhibitions or demonstrations; commercial samples, and sports goods.
As the preferential treatment only applies to goods serving temporary purposes, it is essential to ensure their timely re-exportation within the specified period, without engaging in unauthorized commercial activities, such as sale or lease.
Streamlined customs procedures for imports and exports within the region are also included in the FTZ Opening-Up Measures. For goods that have submitted all the required clearance information and have completed the necessary quarantine procedures, customs authorities should aim to release them within 48 hours from the time of arrival.
Customs authorities are not allowed to refuse preferential tariff treatment for goods solely based on minor errors such as printing or typing mistakes.
The Chinese government included a provision allowing foreign financial institutions to provide a broader range of services as part of the efforts to promote the liberalization of trade. Except for some specific new financial services, foreign institutions in the pilot regions should be allowed to carry out similar services as their Chinese competitors.
However, the financial regulatory authority may determine the type and nature of the institution to carry out this new financial service and require permission to carry out this service.
To streamline processes and improve efficiency, specific timeframes have been established for financial regulatory authorities to make decisions regarding applications from overseas financial institutions and cross-border service providers, which is 120 days upon receiving complete and legally compliant applications.
In situations where a decision cannot be reached within the designated timeframe, the financial regulatory authorities are responsible for informing the applicants and striving to decide within a reasonable period.
To foster international connectivity and facilitate cross-border transactions, enterprises and individuals residing in the FTZs and FTP are now allowed to lawfully purchase overseas financial services.
The FTZ Opening-Up Measures introduce entry privileges for accompanying spouses and family members of foreign professionals in foreign-invested enterprises within the FTZs and FTPs. This provision ensures that accompanying family members can enjoy the same entry and temporary stay period as the employees themselves.
Senior management personnel of foreign companies, responsible for overseeing business operations, and their families can now stay for up to two years in the FTZs and FTPs.
To promote digital trade and protect intellectual property, the FTZ Opening-Up Measures prohibit the requirement of transferring or acquiring software source code as a condition for the importation, distribution, sale, or use of mass-market software (not including software for critical information infrastructure). Businesses involved in digital trade are not compelled to disclose their proprietary source code, safeguarding their intellectual assets.
The FTZs and FTP are also committed to enhancing consumer rights protection systems. This means the implementation of measures to prevent fraudulent and deceptive practices that could harm or potentially harm consumers in online transactions.
To optimize the business environment and attract foreign investment, the FTZ Opening-Up Measures provide a series of business facilitations and improved protection to foreign investors, such as the repatriation and remittance of capital, allowing businesses to transfer their legitimate and compliant gains related to foreign investment.
Such transfers include capital contributions; profits, dividends, interest, capital gains, royalties, management fees, technical guidance fees, and other expenses; total or partial proceeds from the sale of investments, total or partial proceeds from the liquidation of investments; payments made under contracts, including loan agreements; compensation or damages obtained in accordance with the law; and amounts arising from dispute resolution.
Intellectual property rights protection will be enhanced through the prompt provision of intellectual property-related remedies by local people’s courts when businesses submit requests for protection.
After the applicant has provided reasonably available evidence and preliminarily proved that their rights are being infringed or are about to be infringed, the local courts shall promptly take relevant measures in accordance with judicial rules without prior hearing of the statements of the other party.
China recognizes the importance of foreign investment for its economic development and has been working towards integrating its economy to the global community. The FTZ Measures are proof that the local authorities are trying to create a more favorable environment for foreign businesses, streamlining trade procedures, and reducing barriers.
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