China (Shanghai) Pilot Free Trade Zone: Dawn of a new era (3)

Business Regulation and Tax Newsflash

Issue 3 - 28 August 2013

On 22 August 2013, the Ministry of Commerce announced that the State Council had formally approved the establishment of the China (Shanghai) Pilot Free Trade Zone ("China (Shanghai) PFTZ"). Details concerning the overall framework of the Pilot are expected to be announced by the end of the month. However, it is already widely expected that foreign investors will be permitted to freely invest in the China (Shanghai) PFTZ, subject only to the restrictions stipulated in a "Negative List".

Market reaction to date

Although this Pilot is still evolving and the responsible government authority has not yet been formally announced, many investors are already in discussion with relevant government officials concerning new business models hitherto not feasible in China. Discussions that have been reported in the media include:

  • Nintendo and Sony: permission to assemble/manufacture consoles in the China (Shanghai) PFTZ;
  • London Metals Exchange: a delivery warehouse in the Pilot zone;
  • Bank of Communications: centre for conducting offshore finance and cross border RMB business;
  • Global auction houses: permission to conduct cultural relic auctions in the Pilot zone;
  • Entertainment industry: the formation of wholly foreign owned entertainment artist agencies and the establishment of entertainment venues in the Pilot zone;
  • Value added telecommunication service providers: the formation of wholly foreign owned subsidiaries in the Pilot zone to conduct value added telecommunication services.

Our recommendations

Investors who wish to explore business models that currently do not fit within existing rules, are recommended to approach the government to “ask”. This is because the government is taking a new approach to discussing matters with investors:

  • Previously: the government set the rules, investors asked “what the rules were”, then investors tried to fit their business models within those rules;
  • Now: it is more business friendly and market driven. The government is inviting investors to ask questions: “what business model”, “why (for the investor and China)”, and has been holding open and constructive discussions with investors.

We are happy to assist you in understanding how the China (Shanghai) PFTZ may be useful in your business, as well as facilitate communication with relevant authorities. Please call your usual Deloitte contact or our China (Shanghai) PFTZ Lead Partners listed below:

Vivian Jiang
Deloitte China
Tel: +86 21 6141 1098
Clare Lu
Qin Li
Tel: +86 21 6141 1488

Note: Qin Li Law Firm is a licensed Cinese law firm and forms part of Deloitte's global Tax & Legal network. Deloitte Legal is one of the major legal practices around the world.

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