【Exclusive】 Guangdong FTZ: Connecting Guangdong with the world

01 15, 2016      Source:

China (Guangdong) Pilot Free Trade Zone, GDFTZ, was formally unveiled on April 21st, 2015.
As one of 4 pilot Free Trade Zones in China, Guangdong FTZ distinguishes itself by cooperating closely with Hong Kong and Macao to serve the mainland and face the international market. Neighboring Hong Kong and based in Pearl River Delta, the Zone consists of three areas, Nansha area of Guangzhou, Qianhai&Shekou area of Shenzhen, and Hengqin area of Zhuhai. All sub-zones have different targets. Nansha area is to be a new modern industrial base with manufacturing service industry and a world-leading comprehensive service hub. Qianhai & Shekou area targets to be an experimental window to the world for China’s financial industry and a significant base for global service trade and a international hub port. While Hengqin area aims to be a leisure and recreation base for international commercial services, as well as a new carrier that promotes appropriate and diversified economic development in Macao.
Nine months have passed since its inauguration, and many progresses have been achieved in Guangdong FTZ. For instance, in order to establish the international shipping center and hub of 21st century’s maritime silk road, Nansha Area has launched 49 international cargo ship lines to link America, Europe and Africa, etc; establishing economic and trade platform with Portuguese-speaking Countries and Spanish-speaking countries, Hengqin Area set up the first GDFTZ oversea office in Mexico city; prioritizing finance industry, Qianhai & Shekou Area has signed memorandum of cooperation with the city of London.
All these moves prove that the Zone is keeping track with international standards and connecting with the world. The Zone can be so international is due to building an international, market-oriented and law-based business environment, said Zheng Jianrong, director general of General Affairs Office of Guangdong Free Trade Zone. FTZ was officially launched in April 2015 with three strategic positioning. What progress had the Zone achieved in the past nine months?
Zheng: With the three missions assigned by central government, Guangdong FTZ focused on mechanism changes in the past months, and became top mechanism innovator in China.
First, the most important progress Guangdong FTZ has made is to keep track with the international standards of investment and trade and make new rules. The Zone issued negative list for foreign investors and established new mode for serving foreign-invested enterprises. Now the enterprises' registration procedure is much simpler and both the environment and efficiency of clearance are improved.
Second, Guangdong FTZ is close to Hong Kong and Macao geographically. One of the important missions of the Zone is to join hands with Hong Kong and Macao to participate in the global economic cooperation and competition. In the past nine months, Hong Kong and Macao were enthusiastic about the Zone, and over 1,500 enterprises from Hong Kong and Macao had registered in the Zone, mainly dedicated in finance, trade and modern service. These are exactly the fields Pearl River Delta wanted to develop in its industrial transformation and upgrade campaign.
Third, it pushed forward Guangdong's participation in "Belt and Road Initiative" campaign, especially in 21st Modern Maritime Silk Road. Nansha Port and Shekou Port in the Zone had enhanced their cooperation with the ports in the countries on the Maritime Silk Road. The Zone also launched cooperation with Free Trade Parks and Special Economic Zones in these countries. In which areas does Guangdong FTZ meet the high international standards?
Zheng: Building an international, market-oriented and law-based business environment is the key to dock the high international standards of investment and trade system.
In specific, we have issued the FTZ “negative list”, an innovative management method initiated from Shanghai FTZ and optimized by Guangdong FTZ, which reflected that we have gradually improved the investment rules and expanded the market opening.
In terms of business rules, we need to meet the high international supervision standards, especially in customs inspection and quarantine to further improve the efficiency of customs clearance. Although the efficiency of customs clearance in Nansha Port has increased by 50% since the establishment of FTZ, We still have a lot to improve compare to Singapore.
Similarly, in financial regulations, FTZ will follow the arrangements of the state to promote the opening-up of capital step by step, and deepen the management system reform. The Central Bank approved Guangdong FTZ's plan on 30 reforms on financial industries. What will the plan bring to the Zone's financial sector?
Zheng: First, the reform and opening up innovation of the Zone's finance industries pushed forward Guangdong's financial cooperation with Hong Kong and Macao. This is the most worth mentioning part of the move. The mutual recognition of our financial products, the connections between the two financial markets, the barrier removal of the financial industry infrastructures will help Hong Kong, the international financial center, extends its radiation to the Zone. For example, in the plan, an enterprise is allowed to have 10 million USD cross-border free flow annually, that make their capital flow much easier than before.
Second, the Zone will attract high-quality financial elements to support the local enterprises, and even enterprises from other provinces in China, to go global. The enterprises can take advantage of the Zone's finance policies in their overseas investment and cooperation.
Third, the implementation of the 30 reforms will help the Zone foster financial platforms and become a magnet to financial institutions, which will support the transformation and upgrade of the Pearl River Delta's manufacturing, and support the development of the entity economy. are Guangdong FTZ's main advantages and features?
Zheng: As a pioneer in China’s reform, the zone has its unique advantages in docking the international rules and opening up, relying on the entire Pearl River Delta's industrial base.
Besides, cooperating with Hong Kong and Macao is another advantage of the zone. As Hong Kong is one of the world's largest free ports, Hong Kong will better our connection with both mainland and international markets. What measures have General Affairs Office of Guangdong FTZ and other government departments figured out to support the new trade models?
Zheng: As the latest development of economy, it is natural to see a lot of new trade models. On the one hand, the Zone encourages their development, on the other hand, we are finding some new ways for administration such as stronger supervision will be exercised over delegated matters when they are being handled and after they have been handled.
Recently, the supervision model for cross-border e-commerce in the Zone was chose as one of best practical cases by central government. The administration system for cross-border e-commerce is totally different from the past trade model. For instance, in the past, there might be only one kind of clothes in a container, however, now be thousands of different clothes even different products belonging to various owners and consumers in the same container.
Hence, such a new situation brings challenges to the customs. Base on Internet technology, a new administrative measure is launched for connecting documents of orders, logistics and payment as well as records of enterprises and products with the systems of customs, inspection and quarantine. It attracts cross-border e-commerce industries to gather in the Zone. What mechanism innovation have Guangdong FTZ made to attract more enterprises?
Zheng: We had quite a few since the FTZ officially opened months ago. Recently Guangdong province decided to adopt 27 of our innovation measures province-wide.
These 27 measures are all about investment facilitation, business facilitation and financial innovation. This move will bring benefits to related enterprises and people, and help encourage people to start their own businesses and to make innovations.
Specifically, in the aspect of investment facilitation, Nansha now implement a new policy to help enterprisers. In the past when registering a company, they had to queue in 10 departments for 10 certificates. Now they can do it with one simple step within 3 days.
Furthermore, a new tax policy is carried out in FTZ. SMEs and micro-enterprises can declare taxes on a quarterly basis, instead of on a monthly basis. In this occasion enterprises not only can shorten their time of tax declaration, but also pay less taxes by balancing the bounces in business. Regulation of China (Guangdong) Pilot Free Trade Zone will be issued around April. Can you give us some introduction of the construction of it?
Zheng: The Regulation mainly focused on making the current efficient and mature measures into treaties in official document. Also it encourages innovation in grassroot level.
When the Free Trade Zone started operation, we issued pilot managing regulation, which provided fundamental law reference to run the area. After months of operation, we decided to lift the temporary regulation to official rules near the first anniversary of the operation of the Zones.
The good experiences will be made into treaties after nearly one-year trial run, including the facilitation of investment and trade, and the system innovation on stronger supervision over delegated matters being handled and after they have been handled.
In addition, the rules protect and encourage mechanism innovation, especially the grassroot innovation. The fault tolerance mechanism will be included.
Specifically speaking, for example, grassroot innovation reflects on the streamlined administration and delegating more power to lower-level governments, that means the Guangdong FTZ is given municipal-level, or even provincial level powers in many aspects.
With the powers, the Zones are allowed to make new policies to simplify the investment and biz starting invest with way much more innovative possibilities.
In government function change, the three sub-zones have made innovations in negative list issuing, supervisory system, and Big Data usage. With the new rules, we will encourage them to continue their trial. And their experiment will be promoted to other zones and places. For Guangdong FTZ, what are the key works in the next stage?
Zheng: First, we will carry out more experimental work on establishing high-standard investment and trade rules and system under the guidance of the three strategic positioning approved by the State Council.
Second, we will make effort to attract more enterprises from home and abroad to foster high-end industries in the Zone. The past months saw the Zone’s GDP up 40 percent, fixed asset investment up 42 percent, taxation up 90 percent. The Zone embraced 56,000 new enterprises, most of which belong to high-end service industries. We hope that in 2-3 years, Guangdong FTZ will develop a batch of high-end industries. Is Guangdong FTZ attractive to foreign enterprises?
Zheng: More than 2000 foreign companies entered the Zone, some of them are global top 500 companies.
HSBC has set a joint-stock fund company and a security company, and more projects are being planned. Maersk group has increased investment in Nansha Port. More foreign companies related to cross-border e-commerce and financial leasing are coming to the Zone.
The reason why foreign companies choose the Zone is that they are all optimistic about the market-oriented and law-based international business environment that the Zone owns.
Firstly, it is more convenient for foreign capital to enter Guangdong FTZ, since they just need to do filing instead of waiting to get approval. Also the Zone owns top-rank infrastructure, business environment and governmental services, which exactly match the foreign companies’ needs.
Also, the Zone enjoys a better law-based business environment, compared with other 3 Free Trade Zones in China. Now Nansha, Hengqin and Qianhai has start reforms in court, and established international arbitration centers, and professional arbitral institutions on shipping, finance and intellectual property. Meanwhile, legal search centers from International Court of Justice has been set in the Zone, offering international law services for foreign companies. is the next plan of Guangdong FTZ?
Zheng: Currently, Guangdong FTZ is authorized to advance system innovation. At the next stage, we focused on implementation of the innovative success.
For example, it takes time to implement Guangdong FTZ’s plan on 30 reforms on financial industries. The cross border financing of Foreign companies is expected to be more convenient when it comes into effect. The 30 reforms on financial industries for instance, specifies that companies within 10 million USD are allowed cross border flows, which well-facilitate the cross-border capital flow of FTZ’s companies.
Guangdong FTZ emphasizes on system innovation, and creating business environment of internationalization, marketization, and legalization. It is the most special features that it distinguished from late developed zones other functional zones. Besides, the transportation infrastructure, supporting facilities of ports that possess by the Nansha, Qianhai and Hengqin are the best among other economic functional zones. We also provide lovely living environment to investors. The Zones maintain integration of industries and green living environment. To summarize, we expect to see a increasingly open and green Guangdong FTZ in the future.
We hope that oversea investors can come to Guangdong FTZ, so that they can experience the business environment, get to know our governmental services by themselves.
Backgrounder: the differences between FTZ and bonded port
The special customs controlling zone or bonded port mainly focus on conducting regulation on goods. It is a special zone serves for commodity trade. Nevertheless, FTZ can not only conduct commodity trade but also to have service trade and investment trade.
Hence, FTZ can make use of the combination of strengths on facilitating investment, trade and finance. It is truly a highland for opening up and institutional innovation.