Shanghai sets out rules on foreign investment
THE Shanghai government published a list of sectors yesterday where foreign investment will be banned or restricted within its new free trade zone (FTZ), but in a departure from usual practice, no permission will be required to invest in other sectors.
The China (Shanghai) Pilot Free Trade Zone officially opened for business on Sunday, and officials have outlined ambitious plans for bold reforms in the country's currency, interest rates, trade and industry policies in the zone, but without giving details on implementation.
The "negative list", published on the FTZ's website (zbw.sh.gov.cn), closely resembles the central government's catalogue of nationwide restrictions on foreign investment.
Officials have said the list will be shortened over time as zone liberalisations gain steam and risks are better understood.
State media has tried to manage expectations by quoting unnamed officials saying dramatic reforms are unlikely to be rolled out this year, while also discouraging property speculation around the zone that has already seen prices for some commercial properties rise 20 per cent over several months.
The list is the first of its kind in China and a step forward compared with China's national "foreign investment catalogue", that divides investment permissions into broad categories - encouraged, allowed, restricted, or banned - which foreign companies complained were too vague and inconsistently interpreted to be of use.
The "negative list" approach means that if a sector is not on the list, foreign companies can invest in it without any restriction or joint-venture requirements; overseas entities just need to register for their projects without applying for approval.
The negative list for the Shanghai FTZ is composed of hundreds of line-item restrictions in 16 major industrial categories, ranging from culture to hydropower to telecommunications, many of which trade partners argue China committed to opening up long ago when it was allowed to join the World Trade Organisation.
The list, however, includes items which allow limited foreign firms investment in new economic areas, such as the exploration of shale gas. Reuters