FTZ Focus Group Quarterly Update – Q3 2016

Published on 2016-11-15

Topics include: Seven new FTZs; “in- and after-process” supervision; financial leasing; and bond business guide.

Seven new FTZs
Central government confirmed its plan to establish seven new FTZs in Chongqing, Henan, Hubei, Liaoning, Sichuan, Shanxi and Zhejiang. With the new FTZs, one-third of all Chinese provinces will soon have their own FTZs. While Shanghai and the other three pioneering zones (in Fujian and Guangdong provinces and Tianjing Municipality) led the way with general reforms in foreign investment, trade and finance, the seven new FTZs are expected to be launched with more geographically specific objectives, in addition to plans to replicate many of the reforms first seen in Shanghai.

“In- and after-process” supervision
In early August, the Shanghai government released its plan to establishan “in- and after-process” supervision system in the FTZ. The aim of the system is to regulate business activity during or after their commencement, so as not to unduly hold up enterprises operating in the FTZ (for example, by moving from pre-approval to filing requirements where possible). The government’s plan emphasises supervisory functions of businesses, industry associations, professional institutions and the public, in particular requiring government authorities to coordinate their duties and improve their methods of supervision. The plan also urges establishment of three service platforms to increase bureaucratic efficiency: a universal supervision platform, online approval capability, and public access to credit information.

Financial leasing
In mid-August 2016, the Shanghai government issued its opinions on accelerating the development of financial leasing within the FTZ, in an effort to encourage foreign investors to establish financial leasing companies in the FTZ. Under the reforms, Shanghai will relax the restrictions on offshore borrowing as applicable to pilot domestic financial leasing companies located in the FTZ, these entities being permitted to conduct cross-border financing and cash pooling business involving both RMB and foreign currency. In addition, customs will simplify the clearance process for importing and exporting equipment for financial leasing. The government will also provide funding support to technology development and environmental protection projects operated by way of financial leasing.

Bond business guide
China Central Depository & Clearing Co., Ltd. published a bond services guide for the FTZ in September 2016. The guide explains the scope of investors who are eligible to participate in bonds in the FTZ and the related account opening process. Similar to the FTZ cross-border bond business guide issued by the Shanghai Clearing House, the new guidance also prescribes the procedure for issuance, sale, clearing and repayment of bonds.