"The guidelines have drawn the outline of future financial reforms. Policies will be adjusted and refined, and ideas behind the Shanghai FTZ will be copied and promoted in other FTZs," said Chen Bing, a research fellow from the Chinese Academy of Governance.

Institutional innovation

Among the innovative measures and policies adopted by the FTZ, the negative list is a significant one. It includes 190 special management measures, and lists the industries that are not fully open to foreign investment. For sectors falling outside the negative list, pre-approval is no longer required for foreign investment projects.

"While ensuring that the risks associated with the establishment of the FTZ are effectively controlled, the negative list leaves much room for foreign investment projects," said Ai.

With administrative formalities being streamlined, enterprises in sectors outside the negative list can get business licenses within four days, while outbound investment projects can get registered within five days, substantially facilitating cross-border investment. In the past two months, a total of 67 foreign-funded enterprises have got registered in the FTZ.

Air transportation is also a key sector for the FTZ. Among the 98 key tasks laid out in the overall plan of building up the FTZ, one fifth need airfreight support.

Shanghai officially launched the LCL (less container load) service in November, which will lower logistics costs, because commodities heading for North Asia need not be transferred via Japan and Singapore where LCL service is available.

Moreover, a subscription registration system has been put in place to stimulate the enthusiasm of start-ups.

"The subscription registration system doesn't mean enterprises are exempt from the requirement of registered capital. They are expected to deposit the registered capital within a certain period. Otherwise, their credibility could be impaired," said Leng Chunhe, Director of the Industrial and Commercial Administration Bureau of China (Shanghai) Pilot Free Trade Zone.

"Small businesses can benefit more from the subscription registration system, which can greatly reduce financial pressures," said Wu Jingjing, an owner of a start-up engaged in the trading of clothing and leather products, and just got her business registered at the comprehensive service center of the FTZ.

In addition, reforms have also been carried out in the regulatory regime. Commodities can enter the FTZ first and be declared at customs later.

In other words, imported cargo can freely enter and exit the FTZ without the intervention of customs authorities with simplified declaration and quarantine procedures, while cargo entering the domestic areas from the FTZ, or cargo from domestic areas entering the FTZ, will be subject to duties and taxes according to the relevant laws and regulations.

"Opening the first line may help Shanghai become a global center for art trading. In the past, purchasers had to head for Hong Kong, Singapore or London to appreciate overseas artworks. Now, works of art can be stored, exhibited and traded without customs declaration if they are not imported to domestic areas," said Hu Huanzhong, General Manager of Shanghai International Artwork Trading Center, who revealed that the FTZ has attracted a cluster of auction companies and art galleries.

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