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Abstract
As a test ground for new policies, the China (Shanghai) Pilot Free Trade Zone (SPFTZ) has been authorized for three years by the Chinese top legislature to suspend the application of certain provisions of the three foreign investment laws. Different from all the previous SEZs which have received some incentive policies from the central government, the SPFTZ has not been offered any preferential treatment. Instead, it has been encouraged to experiment with new innovative measures in administration. During the first three years of piloting reforms, the SPFTZ shall expedite the functional transformation of the government through limiting the administrative power; expand the opening up of service sectors by releasing the limitations on market access; streamline the administrative regulation on foreign investment; develop the multinational corporation headquarter economy with more sophisticated facilities, and try to experiment with new trade forms. As such, experience hence gained shall serve nationwide with new ideas and approaches in the next round of economic reforms.
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Notes
“SEZs are generally defined as geographically delimited areas administered by a single body, offering certain incentives (generally duty-free importing and streamlined customs procedures, etc.) to businesses that physically locate within the zone.” See The Multi-donor Investment Climate Advisory Service of the World Bank Group (Citation2008), p. 2.
The official title for the SPFTZ is “The China (Shanghai) Pilot Free Trade Zone”.
The Bonded Zone shall mainly develop import and export trade, transit trade, processing trade, goods storage, goods transport, commodity goods displays, and commodity goods trade and business such as finance. See Article 3 of Shanghai Municipality, Waigaoqiao Bonded Zone Regulations: http://www.shanghai.gov.cn/nw2/nw2314/nw2318/nw26472/u6aw2093.html.
The concept of SEZs was introduced into China in 1979. The idea was modeled on export processing zones (EZPs) from other developing countries and they “were originally envisioned as areas where foreign investment would be both permitted and controlled in an effort to gain national economic advantage from world markets.” See G. Crane, (Citation1994), p. 71.
The World Bank Report (Citation2008, p. 10) defines free trade zones as “small, fenced-in, duty-free areas, offering ware-housing, storage, and distribution facilities for trade, trans-shipment, and reexport operations, located in most ports of entry around the world.” See supra note 1.
The Chinese national legislature consists of the People’s Congress and its Standing Committee. People’s Congress convenes once a year while the Standing Committee has its meeting on an average of once a month. According to the Legislature Law, the basic laws like Criminal Law, Procedural Law need to be approved by the People’s Congress while the others can be approved by the Standing Committee. See Hu Citation2012.
In 1978, China’s foreign currency reservewas only $US 167 million, behind many developing countries. Data source: People’s Bank of China.
On August 26, 1980, the Standing Committee of China’s Fifth People’s Congress, at its 15th plenary session, approved the four coastal cities of Shenzhen, Zhuhai, Shantou, and Xiamen (Amoy) as special economic zones which would enjoy more preferential laws and economic policies as a free port.
Shenzhen and Zhuhai were originally two small fishery villages bordering Hong Kong and Macao, respectively. Shantou is a city where the majority of local people have their overseas relationships. These three cities are all in Guangdong Province. Xiamen is located in Southeastern Fujian Province. It is only about two miles away from Kinmen Island which is in effective control of Taiwan.
Shenzhen, for example, has become one of the largest cities in China with the population over ten million.
According the national statistics of 2014, the top four provinces in GDP volume are Guangdong, Jiangsu, Shandong, and Zhejiang. Most of the opened cities are located in these provinces. Data source: National Bureau of Statistics of the People’s Republic of China.
Since the amended Enterprise Income Tax Law came into force in 2008, all types of enterprises have been required to pay the same level of income tax except those registered in the advanced and new technology development pilot zones where all enterprises would pay the tax of 15%, 10% lower than the normal level. See Enterprise Income Tax Law of China, paragraph 2 of Article 28.
By the end of 2013, China’s foreign currency reserve had reached 3,821,315 million U.S. dollars, more than triple that of the second largest country Japan (1,258,809 million U.S. dollars).
Different from the previous SEZs which were based on the processing and production enterprises with foreign investment, or high and new technology development pilot zones which promoted the adoption of new technologies in enterprises, Shanghai Pudong New Area and Tianjin Binhai New Area were chosen to experiment on more comprehensive administrative and economic reforms which were corresponding to the national reform strategies. The former was set up in 1990 and the latter was set up in 2005. The reform in these two areas included the merging of government departments, streamlining of administrative procedures for the registration of multinational corporation headquarters, further opening of service sectors with the set-up of various exchange markets of production elements. These policies have helped to rebuild Shanghai and Tianjin into the financial and shipping centers in China.
See the official website of The China (Shanghai) Pilot Free Trade Zone. Retrieved November 18, 2015 from http://www.china-shftz.gov.cn/Homepage.aspx
As the Chinese president Xi Jingping has repeated on several occasions that China “cannot make any subversive errors” in its economic development, the SPFTZ functions as the laboratory for the next round of national reforms. See Xi Jinping (Citation2013).
Which partly provides: “(a) with respect to a customs union, or an interim agreement leading to a formation of a customs union, the duties and other regulations of commerce imposed at the institution of any such union or interim agreement in respect of trade with contracting parties not parties to such union or agreement shall not on the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce applicable in the constituent territories prior to the formation of such union or the adoption of such interim agreement, as the case may be; (b) with respect to a free-trade area, or an interim agreement leading to the formation of a free-trade area, the duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of such free trade area or the adoption of such interim agreement to the trade of contracting parties not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area, or interim agreement as the case may be”. See https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm
The amendment was passed at the Eighth National People’s Congress.
Although the government administrative approval has been regulated by the Administrative Permission Law since 2004, the various administrative departments are still enjoying much power in issuing the permit. See Articles 12, 14, 15, and 16 of Administrative Permission Law: http://baike.baidu.com/link?url=uc2Q8dzIi7sV91UJANg-Z7bTGzOZsSqt8ltbUDENBbFzDjZKA-sz2x8bDjqpydimgmmiRHJdpd59OBBDTuB_cXfHc8jVlC8HLRFTWU03X-5XzwH0BY0sASL7Decdv-WPEwhXHBZ3L2lLyCzYGshI08Okw3wuxK3xrZFaLlXFg6Kzj_hiVNXHLHFzRRTsi3D3mJ9QKYzuGiNnKk5Zm70nlSYFci1lyYOfHzX0J5GW4dm.
For the Accession Protocol of China, see https://www.wto.org/english/thewto_e/acc_e/a1_chine_e.htm
For the Agreement on Safeguard Measures, see https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm
See GATT BISD, Volume IV, at 64. This provision dates from the 1954–1955 Review Session of the GATT and has its origins of consideration of issues relating to the Working Party on the Accession of Poland.
Article 2.7 of the AD Agreement provides that “this Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I to GATT 1994”. See https://www.wto.org/english/docs_e/legal_e/19-adp_01_e.htm
The relevant cases include DS252, DS368, DS379, DS397, DS399, DS405, DS422, DS437, DS449, and DS452.
The recently concluded Bali Ministerial Conference shed some light on the Doha Round. The Ministerial Declaration adopted on December 7, 2013 contains an ambitious package of decisions, which includes the issues of trade facilitation, agriculture, cotton, and the least-developed countries. See https://www.wto.org/english/thewto_e/minist_e/mc9_e/balideclaration_e.htm
When the GATT was used to replace the still-born International Trade Organization, China was one of its original signatories. Although the Nationalist Party decided to withdraw from the GATT in the early 1950s after it retreated to Taiwan, the Beijing government never accepted this decision. Therefore, China insisted on the resumption of its original status in the GATT. Unfortunately, China’s efforts failed before the GATT was replaced by the WTO in 1995.