TO mark first anniversary of the China (Shanghai) Pilot Free Trade Zone, Shanghai Daily asked several companies operating in the zone for comment on how they have benefited and what further reforms they want to see. The businesses span the sectors of medical research, banking and logistics trading.

INDUSTRIAL and Commercial Bank of China

Industrial and Commercial Bank of China was among the first banks to begin operation in the free trade zone, upgrading its Waigaoqiao branch even before the zone was officially inaugurated.

Within the past year, the bank has been helping clients cut fund-raising costs and speed up administrative procedures by utilizing special bank accounts and regulations within the zone.

Zhou Hong, president of the FTZ branch, shared her views about financial reforms in the zone.

Benefits:

“Services that can help clients cut funding costs are most welcome. Since the free trade account system was implemented, we have conducted more than 1 billion yuan (US$164 million) in cross-border borrowing deals for our clients in the zone.

By borrowing from offshore, the interest rate can be at least a third lower than borrowing onshore. The free trade zone is meant to allow freer money flows with the offshore market, and reforms are under way in that direction. It’s also a lot easier for companies to acquire a foreign entity. Previously all deals need to be approved by authorities in Beijing, which could take months. Now, in the free trade zone, deals below US$300 million are required only to register with local authorities, and the process usually takes no more than five days.”

Expectations:

“When the free trade account system was announced in May, the central bank said it may allow banks to conduct foreign currency business under the system in six months. It’s almost time now, and we hope that such business will be put forward soon. That would meet the demands of our clients. Before the free trade account was announced, we had expected that all businesses would be open once the system was ready. Now we know things need to be done step-by-step, but that’s perfectly natural. We are dealing with different situations when it comes to opening up to the offshore market.”

Mopar

Mopar, a car parts and services provider of Fiat-Chrysler, moved its Asian logistics hub from Singapore to the Yangshan Port in 2010 to support robust China demand.

Every day, tens of thousands of car parts are shipped into the hub, of which 80 percent are sent to inland customers and 20 percent are exported to other Asia-Pacific markets.

Clara Li, head of Mopar’s China supply chain, commented on how the company has been affected by free trade zone policies.

Benefits:

“Having a free trade zone in Yangshan Port not only facilitates our businesses in China but also serves as a substitute for Singapore in supplying products to Asian and Pacific markets. For parts we import and transfer to other destinations, procedures have become much easier. It is the essence of a free trade zone to break down boundaries. The major market has shifted to China, so having a local logistics hub saves a substantial amount of shipping costs and time needed for processing orders. Time is money for us. Simplified customs clearance procedures help a lot. Also, authorities now accept some third-party authorization. For example, some parts that were previously subject to a state safety standard authorization called the China Compulsory Certificate are now accepted under third-party authorization. Using a third party can cut processing time by a day or two.”

Expectations:

“We hope to be allowed to store domestically procured materials in the bonded zone before they are shipped offshore. We know that customs authorities are already working on such a system, and we hope that a detailed regulation will be released soon so that companies like us can start making application and prepare our operations.”

US Pharmacopeial Convention

US Pharmacopeial Convention (USP), a health organization that sets standards for food and drugs globally, first established its China laboratory in 2007. In January this year, the business moved its research and development facilities into the free trade zone.

USP-China is now involved in setting standards for traditional Chinese herbal medicine, in detecting the presence of heavy metals in medicines and in developing standards for the use of taurine, a common ingredient in popular energy drinks.

Chinese Premier Li Keqiang visited the lab this month during a tour of the Free Trade Zone.

Shanghai Daily asked Diana Zhang, director of administration and communications for the organization, to assess the impact of the zone for her business.

Benefits:

“Initially, we wanted to move to the Waigaoqiao bonded zone to take advantages of the tax benefits and a location close to the ports and Pudong International Airport. Policies accompanying the set-up of the pilot free trade zone came as a surprise to us. We indeed have felt the benefits. For example, the time needed for samples to be shipped from the airport to our lab has been shortened by a half — that is, from a week to as short as three days. That cut our import costs by about a quarter.

In addition, we previously had to get pre-approval for every batch of special goods, for example chemical products, that we imported. Now we apply for pre-approval once each year, and the goods can come in several batches. We can also import equipment in batches and customs authorities can inspect our imports once all equipment is in place.

Other helpful measures include moving many administrative applications online so that we don’t have to physically be there. Speed is very important to us, whether we are doing experiments or testing for clients. Helped by these policies, our revenue in the first eight months tripled from last year.”

Expectations:

“We hope that the FTZ will keep up the pace of policy innovation. We import a lot, but our businesses also involve exporting materials for foreign clients. We hope that authorities will simplify export procedures similar to the way they have done for importing chemical products. Also, many governments are involved in the setting of medical standards for herbal medicine and Chinese traditional medicine, and we hope to be able to participate more in government discussions.”

ONE year by dates

2014

September 26 The zone establishes an intellectual property office.

September 18 Shanghai Gold Exchange launches its international gold trading board in the zone.

August 28 The first three ship management companies, including a consulting arm of Danish international shipping giant Maersk establish operations.

August 20 Amazon announces it will develop a cross-border e-commerce market, the first of its kind on China’s mainland.

August 1 A new law comes into effect related to supervision, investment, trade, financial

Services and taxation in the zone.

July 22 Germany-based Artemed Group and Silver Mountain Capital announce plans to

Open the first foreign-owned hospital in the zone.

July 15 Shanghai’s quarantine watchdog unveils measures to simplify import and export

procedures of biological products.

July 1 Shanghai eliminates 51 items from the “negative list” of activities that are off-limits to foreign investors, giving overseas participants wider latitude.

June 27 China’s central bank deregulates interest rates on smaller foreign-currency

Deposits across Shanghai, the first zone reform policy to be extended beyond

The zone.

June 18 Bank of China, Industrial and Commercial Bank of China, China Construction

Bank, Shanghai Pudong Development Bank and Bank of Shanghai begin offering new free trade accounts to companies in the zone.

May 29 An international assets and equity trading platform for financial leasing

Companies is established in the zone.

May 22 The Shanghai headquarters of the People’s Bank of China unveils operating

Details for the establishment of a separate accounting system in the zone.

May 14 The Shanghai bureau of the China Banking Regulatory Commission releases

Regulations on banking in the zone.

April 29 The Shanghai No.1 Intermediate People’s Court releases guidelines on trials

Involving disputes in the zone.

April 22 Shanghai Customs expands measures aimed at simplifying customs clearance

In the zone, after trialing them on a select group of companies.

April 8 The Shanghai International Economic and Trade Arbitration Commission releases

The first arbitration regulations for the zone, adopting several international rules.

March 31 The zone’s management committee relocates its administrative offices to Lingang New City to free up space for business expansion in the Waigaoqiao area.

March 1 China’s central bank removes interest rate ceilings on smaller foreign-currency

Deposits in the zone.

February 21 The Shanghai headquarters of the People’s Bank of China releases operational details for cross-border use of yuan.

February 18 Cross-border yuan payment services are initiated in the zone.

2013

December 28 The zone launches a cross-border e-commerce platform at kuajingtong.com.

December 5 The Bank of China announces that it helped Singapore-based agriculture group Wilmar International complete a cross-border yuan, two-way cash pooling business,

The first deal of its kind in the zone.

December 2 The People’s Bank of China releases a financial reform package for the zone, related to cross-border trade and investment.

November 27 Shanghai Customs opens an anti-smuggling sub-bureau in the zone.

November 24 The zone holds its first auction of 90 watches and jewelry items.

November 22 The Shanghai Futures Exchange unveils its energy trading platform that

Will be used for proposed trading of crude oil futures.

November 6 The zone gets its own court for civil and commercial cases as well as a

prosecutor’s office.

October 22 The zone opens its court of arbitration.

October 8 On the first day of registration, 577 people apply to operate enterprises in the zone.

September 30 Shanghai releases the first version of its “negative list,” specifying which

Commercial activities are off-limits to foreign investors.

September 29 China inaugurates the Shanghai Pilot Free Trade Zone, hailing it as a major milestone in its commitment to advance reforms and open up its markets wider.

September 27 China officially unveils a blueprint for the zone.

August 22 China gives the official
green light to set up a pilot free trade
zone in Shanghai.