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61-610: Shanghai Free-Trade Zone (Shanghai FTZ or SFTZ), officially China (Shanghai) Pilot Free-Trade Zone , is a free-trade zone in Shanghai , China. On 22 August 2013, the State Council approved the establishment of the zone. Officially launched on 29 September 2013 with the backing of Chinese Premier Li Keqiang , it is the first free-trade zone in mainland China and covers an area of 240.2 square kilometres (92.7 sq mi). Shanghai FTZ integrates four existing bonded zones in

122-642: A business, the right to import parts and equipment without duty, the right to keep and use foreign exchange earnings, and sometimes income or property tax breaks . There may also be other incentives relating the methods of customs control and filing requirements. The rationale is that the zones will attract investment, create employment, and thus reduce poverty and unemployment, stimulating the area's economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing, shoes, and electronics). Free-trade zones should be distinguished from free trade areas . A free trade zone

183-578: A company in China. The "one-stop application processing platform" unique to the zone requires that all application materials be submitted to and handled by the Industry and Commerce Authority (AIC) in the zone. The relevant approval and filing procedures are then conducted via inter-departmental circulation, after which the various licenses and certificates (including the business license, enterprise code certificate, and tax registration certificate) are issued to

244-612: A result of this diversification at the peak of the market "would exceed US$ 80 billion." Brad Setser said:"SAFE has built up one of the largest US equity portfolios of any foreign government entity investing abroad, including the major sovereign wealth funds....It appears SAFE began diversifying into equities early in 2007 and, rather than being deterred by the subprime crisis, it continued to buy." On March 23, 2009, deputy governor of China's central bank, Hu Xiaolian told reporter:"China will continue investing in U.S. government bonds while paying close attention to possible fluctuations in

305-663: A subsidiary of the People's Bank of China and became known by its current name, the State Administration of Foreign Exchange. In 1988, SAFE was elevated to report directly to the State Council, but remained under People's Bank of China's management. SAFE has a vice-ministry level position within the Chinese bureaucracy. Historically, its lead executive has also generally held the position of vice governor of

366-546: Is a specific type of FTZ usually set up in developing countries by their governments to promote industrial and commercial exports. According to the World Bank, "an export processing zone is an industrial estate, usually a fenced-in area of 10 to 300 hectares, that specializes in manufacturing for export. It offers firms free trade conditions and a liberal regulatory environment. Its objectives are to attract foreign investors, collaborators, and buyers who can facilitate entry into

427-593: Is normally established in a single country, although there are a few exceptions where a free zone may cross a national border, such as the Syrian/Jordanian Free Trade Zone. Free trade areas are set up between countries; for example, the Latin America Free Trade Association (LAFTA) was created in the 1960 Treaty of Montevideo by Argentina , Brazil , Chile , Mexico , Paraguay , Peru , and Uruguay ; and

488-660: Is still in operation today. Other free zones to note are the Kandla Free Zone in India, which started in about 1960, and the Kaohsiung Export Processing Zone in Taiwan, which started in 1967. The number of worldwide free-trade zones proliferated in the late 20th century. Corporations setting up in a zone may be given a number of regulatory and fiscal incentives, such as the right to establish

549-588: The Central Huijin Investment , but in September 2007, it sold Central Huijin to the newly formed sovereign wealth fund , China Investment Corporation (CIC). With the burgeoning of China's reserves and amidst increasing rivalry between state agencies, there are signs of growing independence of and competition between the subsidiaries. Since CIC entered global markets shortly before the 2007–2008 financial crisis , its initial performance

610-734: The North American Free Trade Agreement was established between Mexico, the United States, and Canada. In free trade areas, tariffs are only lowered between member countries. They should also be distinguished from customs unions, like the former European Economic Community, where several countries agree to unify customs regulations and eliminate customs between the union members. Free-trade zones have more recently been also called special economic zones in some countries. Special economic zones (SEZs) have been established in many countries as testing grounds for

671-601: The People's Bank of China 's Proposal on the Reform of China's Banking System. This resulted in the establishment of the State Central Administration of Foreign Exchange (SCAFE), which managed China's then-small amount of foreign reserves. Although under the authority of the State Council, SCAFE was administered by the People's Bank of China. After the State Council reorganization in 1983, SCAFE became

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732-400: The People's Republic of China is an administrative agency under the State Council tasked with drafting rules and regulations governing foreign exchange market activities, and managing the state foreign-exchange reserves , which at the end of December 2016 stood at $ 3.01 trillion for the People's Bank of China . The current director is Zhu Hexin . In 1979, the State Council approved

793-635: The Steelyard in London. The Steelyard, like other Hansa stations, was a separate walled community with its own warehouses, weighing house, chapel, counting houses , and residential quarters. In 1988, remains of the former Hanseatic trading house, once the largest medieval trading complex in Britain, were uncovered by archaeologists during maintenance work on Cannon Street Station. Shannon , Ireland ( Shannon Free Zone ), established in 1959, has claimed to be

854-506: The value of those assets.... Investing in U.S. Treasury bonds is an important component of China's foreign currency reserve investments..." SAFE has branches and offices in all provinces, autonomous regions and municipalities. As of 2005, it had 36 branch offices, 298 central sub-branches and 508 sub-branches. It has branches in Hong Kong , Singapore , London and New York . The Hong Kong office (华安公司 SAFE Investment Company Ltd)

915-683: The Alternative Site Framework (ASF) should be considered. The ASF may be an appropriate option for certain Foreign-Trade Zone projects, but the decision of whether to adopt the new framework and what the configuration of the sites should be requires careful analysis and planning. Regardless of the choice to expand the FTZ project, the sites should be selected and the application drafted in such a manner as to receive swift approval while maximizing benefit to those that locate in

976-558: The FTZ amalgamated two existing bonded zones— Waigaoqiao and Yangshan—a large percentage of its total area is given over to industrial use. Moreover, commercial space was quickly snatched up by speculators betting on the future desirability of the zone's preferential policies. This drove up office rents in the FTZ and has created a bubble in the sector. In response, the Shanghai municipal government implemented measures to rezone industrial districts for commercial and R&D usage. Notably, enterprises are permitted to register virtual offices in

1037-593: The FTZ are able to apply to the Shanghai Institute of Marine Insurance for approval to offer new marine insurance products. This is the first instance of an industry association being granted such powers in China, and is intended to raise the competitiveness of Shanghai's marine insurance industry. Under legislation issued by the Shanghai Municipal Government, foreign investors may establish wholly foreign-owned enterprises (WFOE) in

1098-444: The FTZ, including emergency arbitration, hybrid mediation/arbitration, and lower barriers to summary procedure. Additionally, arbitrators may be chosen from outside of the official roster maintained by SHIAC, provided they satisfy certain qualifying criteria. The zone cancels out a number of financial requirements for setting up a company in China, including the minimum registration capital of RMB 30,000 for limited liability companies,

1159-472: The FTZ, through which they can still enjoy the zone's distinctive regulations. The zone introduces a number of reforms designed to create a preferential environment for foreign investment. On 18 September 2013, the State Council published a list of 18 service industries to receive more relaxed policies in the zone, including medical services, value-added telecommunications, ocean freight & international ship management and banking. Another important feature of

1220-522: The People's Bank of China. SAFE is the foreign exchange management administrative body of the People's Bank of China. SAFE's existence and role were initially closely guarded secrets, its subsidiaries were minor, but the funds under management have increased significantly in recent years. They were responsible for running SAFE's portfolio across the various time zones, replicating the investments of head office in Beijing. SAFE created and controlled

1281-516: The RMB100,000 minimum for single shareholder companies, and the RMB5 million minimum for joint stock companies. Moreover, under the FTZ's new capital registration system, foreign investors are no longer required to contribute 15 percent capital within three months and full capital within two years of the establishment of a foreign invested enterprise (FIE). Instead, shareholders of companies established in

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1342-465: The Shanghai FTZ will be allowed to enter into an agreement with a Chinese law firm to mutually dispatch lawyers to the other firm. Secondly, foreign law firms that have already established ROs in China can now set up joint operations in the Shanghai FTZ with Chinese law firms, whereby they may provide legal services to Chinese and foreign clients based on Chinese and foreign laws in accordance with

1403-530: The UAE. In these Free Zones, investors benefit from maintaining full business ownership and receiving tax exemptions. Some of the benefits of setting up business in UAE Free Zones are: Some Free Zones in UAE are: Kuwait's free trade zone (FTZ) was formally established in 1999 to expand businesses and lure the export industry. The zone was located in the western part of the commercial port of Shuwaikh . It

1464-399: The United States have recently been making use of the flexible opportunities offered by the Alternative Site Framework (ASF) program. The ASF program is designed to serve zone projects that want the flexibility to both attract users/operators to certain fixed sites but also want the ability to serve companies at other locations where the demand for FTZ services will arise in the future. FTZ 32

1525-889: The United States, the Foreign-Trade Zones Board (FTZB), established under the Foreign-Trade Zones (FTZ) Act of 1934, is led by the Secretary of Commerce and the Secretary of the Treasury . In January 2009, the Foreign-Trade Zones Board adopted an FTZ Board staff proposal to make what it called the Alternative Site Framework (ASF) as a means of designating and managing general-purpose FTZ sites through reorganization. The ASF provides Foreign-Trade Zone grantees greater flexibility to meet specific requests for zone status by utilizing

1586-684: The Zone. Successful zone projects are generally the result of a plan developed and implemented by individuals who understand all aspects of the FTZ program. The FTZB approves the reorganization of Foreign Trade Zone (FTZ) 32 under the alternative site framework. The application submitted by its grantee, the Greater Miami Foreign Trade Zone was approved and officially ordered by the FTZB on January 8, 2013. From California to Oklahoma, North Carolina, and New York State, FTZs all across

1647-575: The applicant(s) by the AIC. This means that applicants may obtain all the necessary documents for company establishment in one place, in contrast with outside the zone where applicants must run around between different authorities for the issuance of various certificates. According to the Shanghai Statistics Bureau, close to 10,000 businesses had registered within the FTZ as of June 2014—661 of which were foreign-invested enterprises. By

1708-538: The case. This has been a boom to the wine industry in China, as it grants importers more flexibility in bringing wine into the country. The FTZ features a mechanism for dispute resolution that doesn't exist elsewhere in China. Arbitration in the zone is governed by a separate set of Arbitration Rules issued by the Shanghai International Arbitration Center (SHIAC). These introduce several reforms favourable to foreign investment in

1769-603: The district of Pudong— Waigaoqiao Free Trade Zone , Waigaoqiao Free Trade Logistics Park , Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone . Since 21 April 2015, the zone's areas have been expanded to include Lujiazui Financial and Trade Zone , Shanghai Jinqiao Economic and Technological Development Zone (formerly Jinqiao Export Processing Zone) and Zhangjiang Hi-Tech Park . On 6 August 2019, Shanghai FTZ's areas were expanded again to include Nanhui New City (Lingang New City), Lingang Equipment Industry Area, Xiao Yangshan island ( Yangshan Port ) and

1830-416: The domestic government pays part of the initial cost of factory setup, loosens environmental protections and rules regarding negligence and the treatment of workers , and promises not to ask payment of taxes for the next few years. When the taxation-free years are over, the corporation that set up the factory without fully assuming its costs is often able to set up operations elsewhere for less expense than

1891-531: The end of 2020, a total of 69,000 enterprises had been established in the FTZ, including 12,000 foreign enterprises. As announced by the State Administration of Foreign Exchange (SAFE) Shanghai branch on 28 February 2014, the FTZ will permit yuan convertibility and unrestricted foreign currency exchange, and a tax-free period of 10 years for the businesses in the area as a means to simplify the process of foreign direct investment (FDI) and facilitate

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1952-648: The financial industry, manufacturing, and transportation services. In March 2019, China adopted the Foreign Investment Law , which legalizes the state's power to establish FTZs and carry out pilot policies and measures on foreign investment in specific sectors. In one of the first measures introduced as part of the Shanghai FTZ, the General Administration of Customs (GAC) launched a cross-border E-commerce platform, buyeasi.com ( Chinese : 跨境通 ; pinyin : Kuàjìng tōng ). This

2013-619: The financing of the Belt and Road Initiative , including through its 65% ownership of the Silk Road Fund . It contributed some of the Fund's initial capital, along with China Development Bank , CIC, and Export-Import Bank of China . The SAFE Co-Financing Office extends foreign exchange entrusted loans to qualified Chinese companies seeking to engage in foreign investment, merger, or acquisition. SAFE provides preferential loan access to

2074-530: The first "modern" free trade zone. The Shannon Zone was started to help the city airport adjust to a radical change in aircraft technology that permitted longer range aircraft to skip previously-required refueling stops in Shannon. It was an attempt by the Irish government to maintain employment around the airport so that the airport would continue to generate revenue for the Irish economy. It was hugely successful and

2135-578: The first Export processing zones in 1988, aiming to fight the unbalances in the country. First EPZ area in operation was located near of the Port of Pecém in Ceará . Companies in these areas are benefited from tax exemptions and incentives at the ICMS Tax (State Value-Added Tax). Some Brazilian states offer other regional incentives. Companies also can take advantage of a Foreign exchange treatment supported by

2196-506: The implementation of liberal market economy principles. SEZs are viewed as instruments to enhance the acceptability and the credibility of the transformation policies and to attract domestic and foreign investment. The change in terminology has been driven by the formation of the World Trade Organization (WTO), which prohibits members from offering certain types of fiscal incentives to promote the exports of goods, thus why

2257-971: The import of raw materials or components and the export of factory products, but this is a dated definition as more and more free-trade zones focus on service industries such as software, back-office operations, research, and financial services. Free-trade zones are referred to as "foreign-trade zones" in the United States (Foreign Trade Zones Act of 1934), where FTZs provide customs-related advantages as well as exemptions from state and local inventory taxes. In other countries, they have been called "duty-free export processing zones," "export-free zones," "export processing zones," "free export zones," "free zones," "industrial free zones," "investment promotion zones," "maquiladoras," and "special economic zones". Some were previously called "free ports". Free zones range from specific-purpose manufacturing facilities to areas where legal systems and economic regulation vary from

2318-804: The industry is dominated by state-owned giants China Mobile , China Unicom and China Telecom . However, the zone does allow foreign investment in "value-added telecom services" (VATS), defined as non-core telecom services (i.e. services other than voice calls, fax, and basic messaging). VATS enterprises in the zone also benefit from a shortened approval process. 31°20′03″N 121°35′56″E  /  31.3343°N 121.5990°E  / 31.3343; 121.5990 Free-trade zone The World Bank defines free trade zones as "small, fenced-in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipment , and re-export operations". Free-trade zones can also be defined as labor-intensive manufacturing centers that involve

2379-560: The law that created the EPZ and proximity of Custom authorities with offices inside the EPZ. China has specific rules differentiating an EPZ from a FTZ. For example, 70% of goods in EPZs must be exported, but there is no such quota for FTZs. The world's first-documented free-trade zone was established on the Greek Island of Delos in 166 BCE. It lasted until about 69 BCE when the island

2440-615: The management of capital accounts. Under the new regulations, foreign invested enterprises (FIEs) registered in the FTZ may now make foreign exchange capital account settlements at their own discretion, as opposed to under the previous rules, where settlements were restricted to those deemed to be "actual needs" by SAFE. FIEs in the FTZ may also now open RMB special deposit accounts to hold RMB funds obtained from foreign exchange settlements, which may then be used to make payments for real transactions. However, restrictions still apply for using RMB funds for certain types of transactions. Given that

2501-404: The medical industry in the FTZ. Foreign ownership (up to 70 percent) is also permitted for equity or cooperative joint ventures in the medical industry. Both forms of establishment are subject to certain conditions, such as a minimum total investment of RMB20 million and a maximum operating period of 20 years. China's telecom sector remains heavily restricted in the FTZ as elsewhere in China, where

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2562-522: The minor boundary modification process. The theory of the ASF is that by more closely linking the amount of FTZ-designated space to the amount of space activated with Customs and Border Protection, Zone users would have better and quicker access to benefits. When an FTZ grantee evaluates whether or not to expand its FTZ project in order to improve the ease in which the Zone may be utilized by existing companies, as well as how it attracts new prospective companies,

2623-454: The normal provisions of the country concerned. Free zones may reduce or eliminate taxes, customs duties, and regulatory requirements for registration of business. Zones around the world often provide special exemptions from normal immigration procedures and foreign investment restrictions as well as other features. Free zones are intended to foster economic activity and employment that could occur elsewhere. An export-processing zone ( EPZ )

2684-582: The preceding two months. The ANZ purchase has been confirmed by the bank. SAFE also invested in BP and Total in April 2008. SAFE owns 65 percent of the Silk Road Fund. SAFE owns the company Buttonwood Investment Holding Company Ltd. As of 2019, Buttonwood is the majority owner of Export-Import Bank of China and is an owner of China Development Bank , which are two of China's policy banks . As

2745-597: The reserves continue to grow, the central bank is aiming to boost investment returns on its foreign-exchange holdings by making somewhat riskier but higher-yielding investments. Pronouncements of Chinese officials are consequently closely scrutinised; each trade is reportedly up to US$ 1 billion. As part of diversification in 2008, SAFE acquired small stakes in dozens of companies including British companies Rio Tinto , Royal Dutch Shell , BP , Barclays , Tesco and RBS . Brad Setser , speaking in March 2009 said losses as

2806-596: The rights and obligations stipulated in their agreement. The logistics industry in the FTZ benefits from the presence of Waigaoqiao Port, Yangshan Deepwater Port , and Pudong International Airport, as well as the streamlined customs approval process in the zone, which halves the time required to bring goods into/out of China. As a result of the rush of companies looking to incorporate in the zone, industrial property (warehouses) has witnessed soaring rental prices in comparison with elsewhere in Shanghai. Insurance companies in

2867-411: The south side of Pudong Airport . The zone is being used as a testing ground for a number of economic and social reforms. For example, the sale of video game consoles, banned in China since 2000, will be allowed within the zone. While Microsoft had aimed at having its Xbox on the market by late April 2014, it ended up being delayed to September 23, 2014. While selling video game consoles was exclusive to

2928-739: The strategically important state-owned enterprises of the State-Owned Assets Supervision and Administration Commission (SASAC). The current Administrator of SAFE is Zhu Hexin. Zheng Wei, Li Hongyan and Xu Zhibin are Deputy Administrators. The magnitude of China's reserves is disclosed, but not its composition. At the end of 2006, approximately 70 percent of the reserves were in U.S. dollar assets, 20 per cent in euros and 10 per cent in other currencies, according to economist Brad Setser . Most of China's currency reserves are invested in high grade U.S.-dollar-denominated debt, such as U.S. Treasuries , though as early as 2007 it

2989-665: The taxes to be paid, giving it leverage to take the host government to the bargaining table with more demands, but parent companies in the United States are rarely held accountable. Political writer Naomi Klein has also criticized the transient nature of FTZs, noting the factory closures connected to the 1997 Asian financial crisis . She criticized the low wages and long hours, citing workdays of twelve or more hours in Indonesia, Philippines, Southern China, and Sri Lanka circa 2000. State Administration of Foreign Exchange The State Administration of Foreign Exchange ( SAFE ) of

3050-463: The term Export Processing Zone (EPZ) is no longer used with newer zones. For example, India converted all of its EPZs to SEZs in 2000. In 1999, there were 43 million people working in about 3,000 FTZs spanning 116 countries and producing clothes , shoes , sneakers , electronics , and toys . The basic objectives of economic zones are to enhance foreign exchange earnings, develop export-oriented industries, and generate employment opportunities. In

3111-401: The use of bonded warehouses. The FTZ introduces two main changes to the Chinese legal services industry: firstly, whereas previously foreign lawyers were prohibited from directly participating in China's legal affairs and foreign law firms were only permitted to set up a branch or a representative office (RO) in China, under the FTZ pilot program, a foreign law firm that has established an RO in

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3172-889: The world market for some of the economy's industrial goods, thus generating employment and foreign exchange". Most FTZs are located in developing countries ; Brazil , Colombia , India , Indonesia , El Salvador , China , the Philippines , Malaysia , Bangladesh , Nigeria , Pakistan , Mexico , the Dominican Republic , Costa Rica , Honduras , Guatemala , Kenya , Sri Lanka , Mauritius , and Madagascar all have EPZ programs. In 1997, 93 countries had set up export processing zones, employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people. In Brazil, 25 Export-Processing Zones have been authorized in 17 states, and 19 of them have been implemented. Brazilian government launched

3233-433: The zone at the time, the ban on video game consoles was later lifted completely in 2015. Although it was initially reported that the zone would also have unrestricted access to the internet (with bans on sites such as Facebook lifted), the official Xinhua News Agency has stated that Internet restrictions would not be lifted. Commodities entering the zone are not subject to duty and customs clearance as would otherwise be

3294-562: The zone is found in its " negative list " approach to foreign investment, which is permitted in all sectors unless explicitly prohibited by the inclusion of a given sector on the Negative List published by the Shanghai municipal government . The 16 sectors thus named as restricted or prohibited for foreign investment are organized as follows: The Negative List was updated in July 2014, further relaxing restrictions on foreign investment in

3355-440: The zone may agree upon the contribution amount, form, and period of contribution at their own discretion. However, shareholders are still liable for the authenticity and legality of capital contributions and will be held accountable to the company within the limits of their respective subscribed capital or shares. In addition to these financial reforms, the FTZ also introduces a simplified procedure for foreign investors to establish

3416-600: Was estimated that SAFE held $ 100 billion worth of U.S. mortgage-backed securities , hoping to achieve higher returns than those on U.S. Treasuries. "The Hong Kong subsidiary is notably taking more risk in managing reserves," according to an informed source. The Financial Times reported on 4 January 2008 that the Hong Kong branch had bought stakes of less than 1 percent in both Commonwealth Bank of Australia and Australia and New Zealand Banking Group , respectively Australia's second and third-biggest lender by assets, over

3477-555: Was founded in 1979 and processes over $ 1 billion in goods with products from more than 65 countries and exported to more than 75 countries worldwide with speed and efficiency. According to the official order from the FTZB, FTZ 32 existing site 1, Miami Free Zone, will be classified as a magnet site. Due to growing business opportunities in the United Arab Emirates (UAE), the UAE government has introduced 'Free Zones' to make it easier for foreigners to invest and operate in

3538-448: Was intended to stymie the widespread evasion of customs duty and smuggling that have emerged amidst China's booming e-commerce market through online vendors such as Taobao . Products on the new site, which will be monitored by the GAC, are sold by vendors who have conducted record-filing with the customs authorities, thereby avoiding the risk of fake products and lowering product prices through

3599-446: Was lackluster. This in turn created a political opening for SAFE to expand the sovereign funds under its jurisdiction, which it did in 2013. SAFE's sovereign funds invest part of China's foreign exchange reserves in investment vehicles including infrastructure projects, real estate, private equity, and strategic resources. SAFE's sovereign funds invest in both foreign and domestic Chinese companies. It has indirectly contributed to

3660-621: Was overrun by pirates. The Romans had many civitas libera , or free cities, some of which could coin money, establish their own laws, and not pay an annual tribute to the Roman Emperor . These continued through at least the first millennium CE. In the 12th century, the Hanseatic League began operating in Northern Europe and established trading colonies throughout Europe. These Free Trade Zones included Hamburg and

3721-501: Was the only free trade zone in the country. In 2019, the Council of Ministers cancelled the free-zone, leaving Kuwait without a special economic zone. Aberdeen Group research published in 2013 noted that best-in-class companies make strategic use of free-trade zones as a means of reducing inbound trade costs, shortening import timescales, and optimising the balance of their corporate sourcing and operational activities. Sometimes

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