Meaning
Special economic areas established in the Shanghai municipality are designed to test financial liberalization and trade facilitation policies. The Shanghai Free Trade Zone operates under the supervision of the municipal government and the national commerce ministry to pilot reform programs. It provides foreign companies with relaxed capital controls, streamlined customs clearance and access to a negative list for investment.
The geographic boundary of this zone limits these administrative advantages to businesses physically registered within its borders.
Financial Liberalization
Utilizing free trade accounts allows companies to move capital across borders with fewer administrative restrictions. Within the Shanghai Free Trade Zone, businesses can access offshore RMB funding and execute cross-border cash pooling. This reduces the borrowing costs for foreign-invested enterprises operating in mainland China.
Customs Simplification
Accelerating the clearance of imported goods through the port of Shanghai reduces logistics costs for international distributors. The Shanghai Free Trade Zone employs a system where goods can be entered into the zone before completing the formal customs declarations. This enables companies to store inventory in bonded warehouses and delay the payment of import duties.
Negative List
Reducing the number of restricted industries for foreign investors encourages direct investment in advanced technology sectors. The Shanghai Free Trade Zone uses a shorter negative list than the rest of the country. This allows international firms to establish wholly foreign-owned enterprises in sectors that would otherwise require a local joint venture partner.
