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Shanghai Free Trade Zone's New Investment System

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In September 2015, the China (Shanghai) pilot free trade zone overseas investment service alliance was established. Foreign investment in the free trade area has entered the 3.0 version, which is centered on the construction of management service chain. We have established overseas investment project libraries, capital bases and information Banks, and established an overseas investment guarantee system for enterprises to promote the gradual and international integration of overseas investment.

Shanghai Free Trade Zone (FTZ)

At the beginning of the establishment of the Shanghai free trade zone, the 1.0 version of the reform of investment management system was the core, and the approval and filing of foreign investment system and the facilitation of investment management were highlighted. In the second stage, financial reform is the core, and the facilitation of overseas investment and financing is realized.

The latest data show that investment in free trade areas has multiplied exponentially as the overseas investment system continues to innovate.

In the view of the industry, the foreign investment in the Shanghai free trade area has three advantages. The first is the investment convenience, the FTA takes the lead in implementing the overseas investment record management in the whole country. It simplifies the process of multi sector and multi process approval which has been used for several months, and simplifies it as "one form application, one acceptance". The enterprise will be able to get the record certificate within three working days.

Second, financing facilities, the Shanghai free trade zone canceled the pre-approval of foreign financing, under the free trade account accounting management framework, enterprises and various financial institutions can integrate themselves from overseas into low-cost funds. At present, several Banks have provided financing services through free trade accounts, operations and mergers and acquisitions of overseas branches of enterprises.

The third is the mode innovation, free trade area innovation breakthrough the equity funds at sea road, power companies worldwide potential acquisitions, expand the international market, including private enterprises and state-owned enterprises cooperation overseas. At the same time, the financial institutions in the region also actively carry out cross-border investment and financing businesses, including internal security loans, cross-border m&a and project loans, cross-border asset management and wealth management.

The cross-border investment of the Shanghai free trade zone was kicked off with the establishment of an overseas investment service alliance by six launching units, such as external joint business consultation, overseas fund control, and long-term equity investment. Version 3.0 means that free trade will be established overseas investment of the whole life cycle of service system, through the integration of law firms, accounting firms, consultants, appraisal institution, financing services and other professional strength, which promote the overseas investment project, capital library, database construction, realizes the government, intermediary structure and enterprise's effective links and information sharing.

In order to improve the supporting services for overseas investment record system reform and accelerate the construction of overseas investment promotion system, the Shanghai Free Trade Area Management Committee has completed the construction of overseas investment service platform. The offshore investment service platform implements overseas investment services online and offline, and establishes specialized agencies to provide full process services for the "go global" enterprises in the free trade area, providing "full process services from overseas enterprises to be closed for business". According to the introduction, the original businesses need to purchase these services. Now the overseas investment service platform integrates the relevant service providers, and the two-way pairing is made according to the needs of the investment enterprises, and the service is free. In addition, the platform also attracts a number of overseas associations and foreign agencies to provide information on the overseas investment environment, projects and other aspects.

In the past ten years, with the development of China's economy and the strengthening of the strength of enterprises, the investment of Chinese enterprises has developed rapidly. According to the Ministry of commerce data, China's overseas investment amounted to 2 billion 700 million US dollars in 2002, reaching 12 billion 300 million US dollars in 2005 and 59 billion US dollars in 2010. In 2012, the amount of overseas investment of Chinese enterprises reached 87 billion 800 million US dollars, an increase of 17.6% over 2011, accounting for 6.3% of the total global direct investment of the year, ranking third in the world after the US and Japan.

In September 27, 2013, the State Council approved the overall plan for the China (Shanghai) free trade test area, it is clear that in China (Shanghai) free trade test area, the reform of foreign investment management mode and the construction of foreign investment service promoting system are made. It includes a management system based on filing system for overseas investment enterprises, filing system for overseas projects, strengthening management and services after overseas investment, and supporting various types of investors in FTA to carry out various forms of overseas investment.

Subsequently, the Shanghai Municipal People's government formulated and published relevant supporting regulations. It includes "China (Shanghai) free trade pilot area management method", "China (Shanghai) free trade trial area overseas investing project record management method", "China (Shanghai) free trade test area overseas investment and start-up enterprise record management method" and so on. The two sets of record management methods for overseas investment in FTA are separately stipulated for overseas investment projects and overseas investment start-up enterprises, and the Management Committee of the free trade area is also a record authority for enterprises overseas investment projects and overseas investment start-up enterprises.

In December 2, 2013, in order to increase financial support for the real economic development of the free trade area and cross-border investment and financing, the people's Bank of China issued the opinion on the construction of the financial support for China (Shanghai) free trade test area, the direction of reform is pointed out in the following aspects: innovating the special account supervision system of the FTA, exploring the convenience of investment and financing, expanding the cross border using RMB and deepening the reform of foreign exchange management.

The Shanghai free trade zone, as a "testing ground" for promoting reform and opening up the open economy, firstly, it broke through the existing overseas investment management system and changed the foreign investment in the free trade area from the approval system to the preparation system. Through the free trade account, the development of related cross-border financing activities has been promoted and the facilitation of overseas investment and financing has been improved.

Should you have any enquiries about setting up a company in shanghai free trade zone, please feel free to contact us. 

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