Set up a company in the Shanghai Free-trade Zone and you can take advantage of multiple incentives offered by the Chinese government in order to attract foreign investors. This is the first Hong Kong-like free trade area located in mainland China.
This structure is a modern-day option in competition with the UAE Free Trade Zone. It was first introduced and endorsed by Premier Li Keqiang who stated that it was his desire to the Shanghai Free Trade Zone Company a shining example of how China can improve its economic structure and to be competitive with world markets. Many investors have chosen this structure over the traditional Chinese WFOE (Wholly Foreign Owned Enterprise).
The significant benefit of this innovation is that it encourages foreign investment. Moreover, it is possible for foreign businesses to open a Limited Company Shanghai’s Free Trade Zone without real capital requirements. That is, unlike many other jurisdictions, such as Germany, that require significant capital outlays to form companies, the upfront cost is substantially reduced.
The zone covers about 120 square kilometers, or approximately 46.61 square miles, and includes four currently recognized bonded zones in the district of Pudong.
The zone has set out to test a number of reforms. The sale of video game consoles, formerly banned, are allowed in the zone as of this writing. Consoles and games are approved on a case-by-case basis as approved by the Shanghai Municipal Administration of Culture, Radio, Film & TV. The zone still has restricted Internet access as does the rest of China.
There are no stamp duties or customs that would normally be imposed on commodities. This has given a significant boost to the wine industry in China because importers have much greater freedom.
This zone provides a number of reforms to attract foreign investors. There are lists of service industries that have significantly relaxes policies operating in the zone, including (as of this writing) medical services, ocean freight, international ship management, value-added telecom and banking.
One more feature is the “negative list.” This means the business is generally allowed in all sectors unless that type of business is prohibited by inclusion on the Negative List published by the Shanghai Municipal Government. The following business sectors are restricted or prohibited for foreign investment as of this writing:
• Agriculture, forestry, animal husbandry and fishery
• Mining
• Manufacturing
• Production and supply of power, gas and water
• Construction
• Wholesale and retail
• Transportation, warehousing and postal services
• Information transmission, computer services and software
• Finance
• Real estate
• Leasing and commercial services
• Scientific research and technical services
• Water conservancy, environmental, and public facilities management
• Education
• Health and Social Industries
• Cultural, sports and entertainment industries
Provisions further relaxing restrictions on foreign investment in the financial industry, manufacturing, and transportation service have also been included. Shanghai Free-trade Zone is a portal for easy, low-cost and fast entry for foreigners into the Chinese market.
