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July 28, 2021

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Lingang makes strong gains, testing new policies and starting pilot projects

EDITOR’S note: Shanghai, at the forefront of China’s opening-up endeavor, is becoming one of the most desired investment destinations for foreign investors, with paid-in foreign investment totaling 20.23 billion yuan (US$3.16 billion) in 2020, an increase of 6.2 percent from 2019’s record-breaking figure. To sustain the momentum and seek new engines for future growth, the city unveiled a radical master plan in January to develop five “new cities” on urban fringes in districts of Jiading, Qingpu, Songjiang, Fengxian and Nanhui in the Pudong New Area. In the coming months, Shanghai Daily will publish a series of in-depth articles to offer perspectives on the city’s unremiting effort in building an increasingly friendly and attractive business environment for foreign investors, as Shanghai continues its work to better allocate global resources, optimize its urban capacity and sharpen its core competitiveness.Since its launch in 2019, the Lingang Special Area of the China (Shanghai) Pilot Free Trade Zone has taken solid steps to establish itself as a special economic area with strong global market influence and competitiveness by 2035.

A “test field” for institutional opening up, Lingang, which has a startup area of 119.5 square kilometers and plans to expand to 873 square kilometers by 2035, has achieved breakthroughs in a number of key areas as it continues to test new policies and launch pilot projects to optimize its overall business environment.

In one of the latest moves, the People’s Bank of China has vowed to back up Shanghai’s trial in the free use of yuan, further facilitate the free flow of enterprises’ trade and investment funds, and explore the free flow and free convertibility of capital in the Lingang Special Area, Wang Xin, director-general of the PBOC’s Research Bureau, told a press conference held earlier this month on Shanghai’s further opening-up.

The PBOC measures will encourage the inflow of foreign investment and create opportunities for the financial industry and are bound to optimize the business environment in Lingang, according to experts.

Set up to the south of the Dazhi River, east of Jinhui Port, and south of Xiaoyangshan Island and Pudong International Airport in Shanghai, Lingang Special Area was unveiled two years ago as a major strategic decision by the central government to further open up China’s economy.

Other than a mere geographic expansion of the China (Shanghai) Pilot Free Trade Zone entitled to existing policies, Lingang has been granted greater administrative power for self-development, self-reform and self-innovation and targets to match the standard of the most competitive free trade zones worldwide.

To achieve its goal to establish a relatively mature institutional system with “investment and trade liberalization and facilitation at its core” by 2025, supportive policies in promoting investment and trade liberalization and facilitation, including free flow of investment, trade, capital, transportation and employment, have been introduced in the area over the past two years.

In March 2020, for instance, the Lingang Special Area issued details to enable banks to provide cross-border yuan settlement for “quality companies,” allowing qualified enterprises in Lingang to use the yuan to settle cross-border transactions.

Under the new policies, banks can facilitate cross-border yuan settlement for Lingang-based enterprises with a good business performance, mainly those involved in industries such as integrated circuits, artificial intelligence, biomedicine, aerospace, new-energy and intelligent vehicles, smart manufacturing and high-end equipment.

Just two months later in May, a batch of new incentives was unveiled again as Lingang advanced its plan to boost financial development in the area.

The measures, 50 in total, include supporting foreign-funded institutions and subsidiaries of Chinese banks or insurance companies to establish jointly controlled financial management companies in Lingang, and supporting foreign financial institutions to participate in the establishment and investment of financial management subsidiaries of commercial banks.

Foreign investors are encouraged to set up securities companies, fund management companies, futures companies and life insurance companies in Lingang that are controlled or wholly owned by foreign investors.

Multinational companies are also welcome to establish global or regional capital management centers and other headquarters in the area, and participate in inter-bank foreign exchange market transactions upon approval.

Overseas investment institutions, meanwhile, are allowed to launch and set up private funds in Lingang amid a test run of qualified foreign limited partnerships and qualified domestic limited partnerships.

Highlights of the incentives also include cross-border financial taxation rules with international competitiveness, explorations of new taxation rules that adapt to the development of overseas investment and offshore business, as well as a cross-border financial management system with convenient receipt and payment of capital, among others.

As a fruitful result, in September 2020, Amundi BOC Wealth Management, a joint venture between Amundi and BOC Wealth Management, a subsidiary of the Bank of China, received the go-ahead to set up its business from the China Banking and Insurance Regulatory Commission.

It became the first JV company under the CBIRC-regulated wealth management framework that has a foreign shareholder with a majority stake. Registering in the Lingang Special Area, the JV is 55 percent owned by Amundi and the rest by BOC Wealth Management.

Apart from initiatives to facilitate capital, trade and investment, Lingang has also introduced a preferential tax system and policy with international competitiveness.

Business income tax is levied at a reduced rate of 15 percent within five years from establishment for qualified enterprises engaged in manufacturing and research & development in key fields including integrated circuits, artificial intelligence, biomedicine and civil aviation. Subsidy policies for the balance of personal income tax on overseas talent have also been implemented.

Efforts to streamline work processes continue to extend in the area as Lingang keeps upgrading its administration services to lure businesses.

Earlier this month, the area received the green light to pilot a reform on business investment approval procedures. Under the new commitment system involving investment projects, the government is responsible for drafting economic and technical indicators as well as industry-related technical standards while functional departments jointly propose specific, project-based standards and requirements.

Enterprises will be able to proceed with design, construction and other related work after making a legally effective written commitment and the project will be verified upon completion. It will be allowed to commence operations once it passes government checks.

A month ago in June, a reform that allows the one-stop handling of business licences and permits was unveiled in Lingang, another major endeavour made by the area to cut red tape.

In April, a dedicated Internet access was launched by Lingang in partnership with the Shanghai Communications Administration and the Shanghai branches of China Mobile, China Unicom and China Telecom. This helped improve the quality of Internet access and the experience of enterprise users in the area.

Under an earlier released blueprint for Lingang’s development during the 14th Five-Year Plan (2021-2025) period, the total output of frontier industries in Lingang, which include four core industries of integrated circuits, artificial intelligence, biomedicine and civil aviation, will reach about 600 billion yuan (US$92.76 billion), with three to five 100-billion-yuan level industrial clusters.

Lingang is also home to five of the city’s 40 industrial parks, specializing in key fields of biomedicine, digital economy innovation, integrated circuits, civil aviation and marine innovation.

To the north of Dishui Lake, construction on the 30-hectare financial hub with total gross floor area of 1.48 million square meters is currently in full swing. The city’s answer to Singapore’s Marina Bay, it will be built into a cluster of cross-border financial headquarters and a large urban complex integrating offices, hotels, shopping malls, residences and cultural facilities.


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