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Deepening reforms and innovative development of Shanghai Free Trade Zone

Sep 28, 2017

 The Shanghai Municipal Government’s Information Office held a press conference on September 12 on deepening reforms and innovative development of the Shanghai Free Trade Zone. Following are the highlights:

 

Lu Fangzhou, deputy director, Pudong New Area; and deputy director, Shanghai Free Trade Zone Administration

Li Jun, deputy director, Shanghai Financial Service Office

Wu Wei, deputy director, Shanghai Port Services Office

Shen Weihua, deputy director, Shanghai Commerce Commission

Peng Wenhao, deputy director, Shanghai Administration of Industry and Commerce

Zhu Min, deputy director, Shanghai Development and Reform Commission

1. CCTV: I’m with CCTV. I have a question for Deputy Director Lu Fangzhou. Just now you mentioned the separation of certificate and license, what specific measures will Pudong New Area take next in this regard?

Lu Fangzhou: The separation of certificate and license is an important task in the construction of the FTZ. It was approved by the State Council in December 2015, and we initiated this reform in 2016. During the past one and a half years, comprehensive reform of the 116 items in the first round has been completed. In accordance with the guidelines from the municipal government, our work will enter the deepening stage, which will feature the following aspects:

The first feature is full coverage. The first-round separation of certificate and license involved 116 items with high examination and approval frequencies and market attention. In the second round of reforms, we comprehensively sorted out several items related to enterprise market access at the national, municipal and district level. Reform suggestions were raised one by one. The principle is that the key items should be given priority while the general items are fully covered.

The second point is to optimize the methods. The first round of reforms took five forms: canceling approval, turning approval into registration, taking notification and commitment, raising the transparency and predictability of the approval process, and strengthening market access; whereas the new round of reforms will only have four forms: namely canceling approval, turning approval into registration, taking notification commitment and optimizing access administration.

The third characteristic is to strengthen efforts. We are actively seeking support from related departments and ministries, striving to cancel all approval processes that can be done away with, or turn administrative approval into registration. For items that are hard to cancel, especially those involving national security, public security, environment safety and health safety, we will try our best to optimize the approval process. With regards to administrative items at the municipal or Pudong New Area level, we hope to adopt the measure of notification and commitment. In general, we will strengthen our efforts, trying to cancel all those items that can be nixed, and turning those that can’t be canceled into notification and commitment.

The fourth feature is to perfect supervision. Only with good supervision can we have real freedom. After the separation of certificate and license, the focus will be on how to construct a full life-cycle supervision system and to strengthen the supervision during the course and afterwards. We will give importance to integrating the three systems, the first being promoting “six doubles”, and stressing the systematic integration of government supervision. The second point is to adopt various supervision means, and stress systematic integration of supervision measures. The third is to perfect a combined punishment system, stressing systematic integration of supervision results. We hope to construct a better in- and post-course supervision system with the systematic integration.

The fifth is boosting development. An important logic of FTZ construction is that the opening-up pushes forward reforms and vice versa. So I think the separation of certificate and license should be based on promoting economic development. For example, in our first round of reforms, we turned the approval of non-special cosmetics into registration, and set up a service platform for non-special cosmetics registration at Waigaoqiao Cosmetics Market, with the purpose of serving more of these kinds of enterprises, and push their overall development.

Another example is the approval of items related to the medical instrument industry. How can we upgrade our systems, and promote some specific industries to develop faster and better through the reform of separation of certificate and license? These are the characteristics of our new round of reforms. We are confident that under the strong leadership of the CPC Shanghai Committee and government, and on the basis of the success of our first round of reforms, we will be able to deepen reforms and achieve full coverage of this policy.

2. The Paper: During the National Financial Work Conference, three tasks were raised, namely, serving the real economy, preventing and controlling financial risks, and deepening financial reform. In terms of serving the real economy, what financial reform measures will the FTZ take?

Li Jun: It is the duty and purpose of finance to serve the real economy. To allocate more financial resources to key areas and weak points of economic and social development, so as to better satisfy the financial needs of the general public and the diversity of the real economy, it is imperative that finance return to its origin, be subject to and serve the nation’s economic and social development. It is the basic premise for further deepening the innovation experiment of FTZ financial reform and opening up. With regard to serving the real economy, we have pushed efforts in three aspects:

The first is exploiting the advantage of the FTZ financial system innovation, and further putting forward the facilitation of cross-border investment and financing. A free trade accounting system integrating local and foreign currencies has been established, so as to promote cross-border capital flow and use, and provide financial support to the innovative development of real enterprises. Enterprises are encouraged to make full use of resources and markets, both at home and abroad; facilitation of cross-border investment and financing is being realized. We are focusing on serving sci-tech innovation and the real economy. As of the end of July, 55 financial institutions have had their independent accounting system checked and accepted. A total of 68,700 free trade accounts have been opened, with the total revenue reaching 4.098 trillion yuan. The FTZ’s cross-border RMB settlement totaled 673.6 billion yuan, accounting for 60 percent of the city’s total. The financial service function of the free trade account has been expanded further; the scope of business entities that are able to open free trade accounts has been enlarged to include not only enterprises in the FTZ, but also related enterprises involved in sci-tech innovation of the whole city, and even individuals who meet relevant employment requirements. Currently, the 2017 version of the “Shanghai Sci-tech Innovative Employment List” has about 8,800 institutions. Individuals who meet the requirements can also apply for FTE or FTF accounts.

The second is widening the direct financing sources of scientific innovation enterprises on the basis of the exploration and experiment of the FTZ. Financial institutions are urged to push innovation by piloting the “investment and loan linkage” financing service mode, using the FTZ platform. New privately-owned banks oriented at scientific innovation enterprises will be founded, so as to exploit the advantage of flexible mechanism of private businesses, to explore and develop products and innovative services suitable to scientific innovative activities, and to provide them with more targeted and convenient financial services. We will make use of the “sci-tech innovation board” of the Shanghai equity trust trading center within the FTZ and the science and innovation fund to attract more social capital to invest in scientific and technological innovation projects, and help more scientific innovation companies to get listed on the market. We will try to provide convenient overseas investment services for listed technology enterprises registered in the FTZ, and tailor overseas financing schemes for them.

Thirdly, we focus on the financing needs of service entities and push enterprises to “go global”. The RMB Cross-border Inter-bank Payment System (CIPS) provides guarantee for cross-border RMB settlement and actively promotes the cross-border use of RMB. We have strengthened bank credit and other traditional finance to provide financing support to those enterprises going global. We are also actively exploiting the role of the financial element market to serve the “Belt and Road” initiative, expanding the financing channels of real enterprises, and promoting the financing of projects related to “Belt and Road”. We are also trying to establish an interdepartmental coordination mechanism of global financial services, setting up a green channel and speeding up the service procedures for real entities serving the “Belt and Road” initiative.

Wenhui Daily: What is the specific progress of Shanghai’s “international trade single window”? What are the next steps for the upgrade?

Wu Wei: Thank you for your questions. As you know, President Xi Jinping has called for the establishment of a basic system and management model to be connected with international investment and trade rules in the FTZ. The “international trade single window” is one of the typical representatives and highlights of institutional and management model innovation. At a press conference on April 1, I introduced details about the “international trade single window”. Just now Director Zhu also told something about it. Now I will add several points.

A total of 23 departments have joined the “single window” system which features nine functional modules, and four “ones”, that is, one platform, one standard (one form), one login or submission, one result feedback. It integrates the original four independent systems (namely, customs, inspection and quarantine, maritime and immigration inspection), 22 original declaration procedures and 30 feedback procedures. For example, for goods declaration, the new system integrates eight declaration procedures and 14 feedback procedures.

With a large table we have reduced 1,113 items of data to 388. For example, a third of the data has been cut in goods declaration, so has two-thirds of data in shipping declaration. Therefore, efficiency has improved greatly while the cost for enterprises has been reduced, which has won praise from enterprises and gained general recognition from society. Now more than 95 percent of goods can be declared by a “single window”, 100 per cent of shipping declarations are processed by the “single window”. As of the end of July, the platform has seen more than 5,000 users and is serving 240,000 enterprises. Next, the construction of Shanghai’s “international trade single window” will be advanced from six aspects.

The first is to have all kinds of port licenses and qualification certificates, such as application for enterprise qualification and trade import license, incorporated into the international trade single window.

The second is to establish a comprehensive system which connects the various logistic stages of the port so that enterprises can check the customs clearance and logistics status of the goods at any time.

Thirdly, information sharing and information exchange will be fully realized, including information sharing among different supervision departments, mutual assistance in law enforcement and information sharing among enterprises and regulators. The core is to establish a simplified and standardized data system, and to unify enterprise identity authentication.

The fourth is to deepen and expand the innovation function in such fields as service trade, free trade port area, international transfer consolidation, cargo status classification and supervision, aviation and cruise passenger information, and integrity system construction.

Fifth, we will try to promote the regionalization and internationalization of the international trade single window, pushing forward the connectivity of the single window with the corresponding systems of the Yangtze River Delta and the Yangtze River Basin.

Sixth, the construction of Shanghai’s “international trade single window” has to successfully find a way to help the construction of the national “international trade single window”, becoming an integral part of the national “single window”.

Next, Shanghai will continue to strengthen the connectivity and integration of the Shanghai “international trade single window” with the nation’s “single window” through such methods as interface management and data exchange, and explore the experience of establishing a higher-level and a higher-standard national “international trade single window” . Thank you.

China National Radio: I have a question for Deputy Director Shen Weihua. Since the establishment of the FTZ, what special and effective reform measures have been taken in terms of the foreign investment management system? How will you continue to break the resistance in this area?

Shen Weihua: Thank you for your questions. The setting up of the FTZ and its further reform and opening-up follow the important instructions of President Xi Jinping, aimed at building an investment system that connects with internationally accepted investment rules and is of a high standard. We have established the management mode of national treatment before the foreign investment access plus negative list. Besides, the management system is developing towards integration, which features three main aspects, which I will explain in detail.

Firstly, the foreign investment management system based on the negative list has been established. The first is to act on international regulations. Now a lot of bilateral or multilateral negotiations between countries, including the establishment of other international free trade areas, have adopted the management system of high-standard national treatment before access plus foreign investment. The FTZ is the pioneer of such a system in the country. With this system, we have enhanced transparency. The first edition of the foreign investment negative list issued by the FTZ itemized foreign investment shares, joint ventures, cooperation, business scope, and investor qualification, which greatly raise the transparency and certainty for foreign investment. At present, the negative list has undergone three revisions and the terms of restrictions have been reduced from 190 to 95. The Shanghai negative list is classified with reference to the national economy industry classification. There are more than 2,300 items in industry classification of the national economy. In comparison with the standard, more than 95 percent of small classes of national economy industries have already opened in the FTZ. The restriction measures on some projects do not impose a complete ban, but opens them conditionally. So the negative list, from Shanghai’s first edition to the current national version, has a very high degree of openness. The negative list management mode established in Shanghai also has a high level of facilitation. By changing the approval system to registration, we have reduced the registering time from eight working days to one. In the past, applicants had to submit ten documents, now they can complete all the application procedures online, which greatly enhances convenience for foreign investment.

Such management measures have obvious effects. Since its opening until July 2017, the FTZ has seen settlement of 7,860 foreign-invested enterprises, with a total contracted foreign investment of US$91.3 billion. Among them, more than 99 percent were founded by way of registration. A new management system has been set up.

  

2. Four years of practice enables us to set up a pro-investment mechanism that focuses on bringing in capital, technology and intellectual resource.

Over the past four years, besides opening up the investment field, we have taken 54 measures to open up other fields. As of the end of August, more than 2,259 programs have settled in the FTZ. We have had marked results in finance lease, photography, architectural design and construction, performance brokerage, international ship management and telecommunication. Many programs are the first to be set up in China. For instance, insurance brokerage, exclusively-foreign owned hospital, reinsurance company, exclusively-funded yacht design company, exclusively-funded non-degree training institution and specialized health insurance organization are all trailblazers in China.

Because of the opening-up measures and negative list, the FTZ now gathers many functional headquarters. It has 218 company headquarters, accounting for 31.7 percent of all foreign companies in Shanghai. The FTZ now has become the major area for attracting foreign businesses. Also, the FTZ now boasts 180 R&D centers, accounting for 43.3 percent of all foreign-funded centers in Shanghai. Except for management and investment facilitation mechanism, we need a corresponding foreign capital service mechanism.

3. With efforts of all municipal departments concerned, the FTZ has set up a pro-business service mechanism for foreign capital. Driven by demand, we have helped foreign businesses to boost operating efficiency. Our goal is to offer a concentrated service of government functional departments and build a service model with integrated, special, targeted and menu-like service. Also, we have taken measures that facilitate foreign investment companies and help them to settle in the FTZ and upgrade their headquarter capacity consistent with the strategic goals of Pudong. For instance, measures by the central government like centralized custom clearance, centralized customs inspection and afterward inspection all enable headquarter companies to settle in the FTZ and reduce their operating cost. Thanks to these measures, foreign investment has increased this year in Pudong and even in the FTZ. We appreciate efforts of all departments for this hard-won result.

Eastday.com: Industry and commerce department put forward an oversight model that selects the inspection targets and law enforcement officers randomly and publicizes the inspection result. How will it affect the market environment? Are there any new measures?

Peng Wenhao: The supervision model is a key part of our management reform that enhances oversight. We randomly select items for inspection and randomly select law enforcement officers to carry out the inspection and make the result public. This method helps solve problems of the past, like disturbance caused by law enforcement and high cost of law enforcement. Also, it serves as a deterrent for dishonest businesses and reminds them to be law-abiding. The mode first began in Shanghai and has now been adopted across the nation. We are now pushing even harder to carry out the oversight, according to the State Council and Shanghai Municipal Government requirements. Since March this year, our industry and commerce department alone has already inspected more than 40,000 businesses and departments.

So far some new practices have been used. One is we now put more efforts into inspecting operating practices of businesses instead of their registered items. The list of 486 items waiting to be inspected in six districts, including Pudong, covers related practices of functional departments concerned. This is the first new oversight practice.

The second one is that the inspection is now done not only by industry and commerce departments but also by some other departments. In terms of Shanghai, 10 municipal-level departments have published a list of 32 randomly-selected items and carried out nine random inspections.

The third one is what we are trying to do now. That is we are moving from random inspection by a single department to joint inspection by several departments. Recently we have come up with a plan to inspect restaurants with seven departments.

Our next focus is to carry out joint inspections in various fields and even have inter-departmental inspection. In the past, different departments did their own inspection on a market entity based on their legal responsibility. But now joint inter-departmental inspection means we carry out only one comprehensive inspection on a business. If law-violating practices are found, we handle them according to the law. We will work with related departments to further our work on this new approach. Thank you.

People’s Daily: Mr. Zhu Min, is there any highlight for even bolder trials and reform? How can we overcome our weaknesses compared to international standards? Is there any progress on Free Trade Port (FTP)?

Zhu Min: We have clearly explained our highlight of trial and reform in the 3.0 version of the FTZ in Shanghai. Compared with international standards, the top priority is to overcome our weaknesses, enhance institutional innovation, put forward an integrated system for institutional innovation that is consistent with our national opening-up strategy and provide more institutional plans for international competition and cooperation. In four years, we have found that to meet international standards we need to learn from advanced ideas globally and also settle practical problems faced by companies.

1. We need to highlight innovation of ideas and improve our lack of understanding about the market and government relations. To meet international standards, we can learn from best practices globally. Make some institutional plans and the key is to improve the administrative ideas held by government departments about being international and market-oriented. We need to learn the ideas behind the standard and then improve our practice. Just now a journalist mentioned the innovative oversight mode. This derives from the customs management model. The idea is disseminated and practiced in many other regions and areas, which is very important. For example, the negative list of market access can be used for administrative management reform.

2. We should use the FTZ as a stress-test area, improve weaknesses we find from the test and have higher-standard tests for China. For example, in the 3.0 plan we want to expand the opening up in finance, telecommunication and culture. They are also the new topics in investment negotiation of high international standard. The FTZ has conditions to undertake higher standard stress tests.

3. To meet the high standards, we need to take government reform and innovation as the core and improve our weakness in system integration. In the four years of building our pilot FTZ, we have set out measures that also produce great results in other parts of China. But our annual assessment and business survey show that businesses are not fully involved in it. Although better involvement is seen each year, we still have room for improvement. Most importantly, we need to speed up the reform that involves established interests and boost integration of institutional innovation. We are approaching the fifth year of the FTZ, which means our reform is entering a critical and difficult stage. To meet international standards, the top priority is government reform. In this regard, we have put forward new reforms for municipal governance in our 3.0 plan. Mr. Lu reported our progress just now. It means under the framework of Pudong New Area, we use ideas behind building the FTZ to push forward reforms in administrative structure, management, operation and service. This is very important. And it is my answer to the first question.

People have been concerned about FTP since the beginning of this year. This is also a source of concern for us as it is the reform task set out by the third plenary session of the 18th CPC National Congress and also an important task given to Shanghai. It is a priority for making new moves in the FTZ and is emphasized by the municipal government. We have already had subject research and related departments have reviews and inspections about how to meet international standards and business demands. Now we have a much clearer picture about building the free trade port.

Generally speaking, we want to build an FTP with the greatest openness. There are many FTPs in the world. Although there is some institutional disparity, they generally serve the national opening-up strategy and demand for international competition. But there are still some special cases. Therefore we have compared our FTP arrangement with internationally well-received institutional arrangements and adjusted it based on our situation. Thus, we aim to make our arrangement that focuses on international business and expand stress tests for an open economy. This is our first consideration.

2. We need to elevate our comprehensive international competitiveness. We now face a vastly different international market environment and conditions for building our FTP. Our businesses are now much more competitive globally. We need to adjust to higher institutional demand faced by our businesses for global industrial distribution. Our analysis of similar regions worldwide shows the regions were built in 1960s to 1970s and had relatively limited industrial functions. We need to utilize Shanghai’s economic advantages, give full play to the role of trade in leading industries and boost business capacity for distributing resources. This is our second consideration.

3. We need to serve the national strategy. We need to build our high-standard FTP into a bridgehead for the “Belt and Road” initiative and a driving force for realizing our development strategy for the Yangtze River Delta economic zone. Also by tapping into strengths Shanghai boasts in the opening-up environment, resource and management and by integrating the demand of the “Belt and Road” strategy and the Yangtze River Delta economic zone development, we will make Shanghai more international in being the Four Centers and offer wider-ranging services and make Shanghai into a new high ground for trade facilitation and industrial internationalization. All our considerations are reflected in our detailed plans. We are closely coordinating with national and municipal departments concerned for further details and improvement.