Future of a Free Trade Port: Hong Kong, Singapore’s “Free Trade Port” Policy

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Abstract: The core of the free trade zone policy framework includes eight aspects such as relaxed policy environment, open investment field, open finance, liberalized trade, loose supervision, and loose taxation. There is still a certain gap between the Shanghai Free Trade Port policy and Hong Kong and Singapore. Especially financial liberalization.

Foreword

On October 19th, Secretary Xi Jinping’s report on the 19th National Congress of the Communist Party of China put forward: “Given the Free Trade Pilot Zone greater autonomy in reforms and explore the construction of a free trade port”.

On October 19, Secretary of the Shanghai Municipal Party Committee, Mr. Han, was answering questions about the construction of the Free Trade Zone and the plan to build a free trade port. He said: We have taken three steps in the construction of the Free Trade Zone. In September 2013, Shanghai Free Trade Zone was listed. We call it version 1.0. In 2015, the central government approved the plan to deepen the free trade experiment zone. This is the 2.0 version; in May this year, the Central Deep Reform Group formally approved the comprehensive deepening of the Shanghai Free Trade Zone reform. Open plan, this is version 3.0.

The core task of the free trade zone is institutional innovation. After several years of reform, more than 100 innovation systems have been promoted throughout the country. Regarding the free trade port, we are doing a good job in accordance with the plan of the Central Government. Now it is only at the planning stage. The final plan must be approved by the central government.

On October 19th, the 21st Century Report reporter conducted an exclusive interview with Bai Ming, deputy director of the Institute of International Markets of the Ministry of Commerce. Bai Ming mentioned:

As a type of Free Trade Zone (FTZ), free trade ports are generally located at ports and other transportation and logistics hubs. Functionally, they are more convenient for foreign vessels to enter and exit freely, such as import and export of foreign goods, handling, sorting and processing, and repackaging. , storage and transit transit, as well as special import of raw materials for foreign trade processing and re-export, etc., can also enjoy exemption from all or most of the tariffs and other preferential treatment.

In the first half of this year, the “Comprehensive Deepening of China (Shanghai) Pilot Free Trade Pilot Zone Reform and Opening-up Plan” also proposed setting up free trade port zones within the customs special supervision areas such as the Yangshan Bonded Port Area and the Shanghai Pudong Airport Comprehensive Bonded Zone. The highest level in the world is to implement a higher standard of “first-line release” and “second-line safe and efficient management and residence” trade supervision system. According to the plan, Shanghai’s free trade port area will, on the premise of effective prevention and control of port risks, relied on informatization supervision measures to cancel or maximally simplify the trade control measures for goods entering the area, and to simplify the first-line filing procedures to the largest extent. Explore the implementation of financial, foreign exchange, investment and exit-entry management systems in line with international practices, establish and improve risk prevention and control systems.

In fact, the Shanghai Pilot Free Trade Zone also includes port areas such as Waigaoqiao and Yangshan Port; Zhejiang Free Trade Zone is more inclined to free trade port areas in Zhoushan; Tianjin Port Free Trade Zone in Tianjin, Yantian Port in Shenzhen, and these free trade The district itself has a port area. However, there will be no special free trade port in the future. It still needs to be observed. Singapore and Hong Kong are two important reference standards. In recent years, China has made rapid progress. The throughput and infrastructure of our mainland ports are no worse than Singapore and Hong Kong. However, there are still gaps in management capabilities, management systems, efficiency, and internationalization services. After all, they started very early, and the entire opening of the Chinese mainland involves many innovations and changes in institutional mechanisms. It requires a process. However, as the free ports, these two places have achieved the transfer and weakening of many government administrative functions. In this regard, there may be some differences in the construction of free trade ports in the Mainland.

A Free Trade Port Overview

The free trade port is a form of free trade zone. In general, a free trade port refers to a port area that is located outside the territory of the country and territory and customs management, and allows the free entry and exit of overseas goods and funds. All or most of the goods entering or leaving the port area are exempted from customs duties, and free activities such as the free storage, exhibition, dismantling, refitting, repackaging, sorting, processing, and manufacturing of the goods are permitted within the Freeport.

Hong Kong and Singapore in China are free ports with well-established systems and mature development.

The scope of Hong Kong’s Freeport includes the entire Hong Kong region and consists of Hong Kong Island, Kowloon and the New Territories. After the Opium War of 1840, Hong Kong became a free port and implemented a free trade policy. Starting from the re-export trade, Hong Kong has now become a free port with a diversified economic structure.

In 1969, Singapore set up the first free trade zone in Jurong Pier of Jurong Industrial Zone. Today, Singapore has gradually developed into a highly open free trade port. At present, there are 7 free trade zones in Singapore. One of them is mainly air cargo. Changi Airport Free Trade Zone is managed by Changi Airport Group; the other 6 are mainly seaborne cargoes, of which 5 are limited by Singapore Port Group. Corporate management, 1 managed by Jurong Harbour Pte Ltd. The seven free trade zones in Singapore are isolated from the outside world by walls and the access to and from the free trade zone is managed by the Customs inspection station. Both incoming and outgoing personnel and vehicles must be inspected.

In March 2017, the State Council issued the “Reform and Opening Up Program for the Comprehensive Deepening of the China (Shanghai) Pilot Free Trade Zone” issued by the State Council, which mentioned that free trade ports should be established within the customs special supervision areas such as the Yangshan Bonded Port Area and the Shanghai Pudong Airport Comprehensive Free Trade Zone. Area.

To benchmark the highest international standards, the implementation of higher standards of “first-line release”, “second-line safe and efficient management of live-in” trade supervision system. According to the state’s authorization to implement an intensive management system, and under the premise of effective prevention and control of port risks, relying on information-based supervision means, cancel or minimize the trade control measures for goods entering the area, and simplifies the first-line filing procedures to the largest extent. Explore the implementation of financial, foreign exchange, investment and exit-entry management systems in line with international practices, establish and improve risk prevention and control systems.

2 Comparison of Shanghai Free Trade Zone Policy with Free Port Policies in Hong Kong and Singapore

Note: The content of this section is not to prove the point of view of the shipment. It is an article published by the Task Force of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce in 2014 that compares the Free Port Policy between China (Shanghai) Free Trade Experimental Zone and Hong Kong and Singapore. Learn from the viewpoint of research.

Shanghai Free Trade Port is still in the planning stage and there is no further information. We think it may be based on the current free trade trial zone to deepen it. As a mature free trade port, Hong Kong and Singapore are generally benchmarks for international businesses to formulate relevant policies and have a high reference value.

In 2014, the research group of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce published an article “Comparison and Reference of Free Port Policies between China (Shanghai) Free Trade Experimental Zone and Hong Kong and Singapore, China”. This article is also a key topic for decision-making consultation of the Shanghai Municipal Government (2013- Part A-28) of the research results. This article analyzes in detail the policies of Hong Kong and Singapore Freeport and the comparison with Shanghai Free Trade Zone. We have collated the main contents of this article so that investors can understand the relevant policies of overseas mature free trade ports.

The core of the free trade policy framework includes eight aspects, namely, a relaxed policy environment, open investment areas, financial liberalization, trade liberalization, loose supervision, loose taxation, perfect legal system, and freedom of movement of natural persons. There is a certain gap between Shanghai Free Trade Zone policy and Hong Kong and Singapore in these eight areas:

   
First, government functions need to be optimized.

The procedures for registration of enterprises in the Shanghai Free Trade Zone have basically reached the international advanced level. The registration of industrial and commercial registrations, “acceptance of registration”, registration of registered capital, registration of “first license”, and public announcement of annual reports have been implemented, but corporate tax burden remains high. There is still a certain limit on the scope of business operations of the company. The Shanghai Free Trade Zone currently consists of four independent regions. The management structure is relatively complex. The unified platform and coordinated supervision of the various administrative departments of the Free Trade Zone are still at the initial stage. Natural person mobility is still far from the international advanced level.

The Hong Kong government implements a positive non-intervention policy, limits the government’s functions to the smallest possible range, and gives the market economy full freedom. In terms of market access, the Hong Kong SAR Government has a highly efficient service and standardized management. The specific performance is as follows: high enterprise registration efficiency, loose registration conditions, and regulation of investment companies.

Corporate registration is highly efficient. The procedures for registration and registration of enterprises in the Hong Kong Special Administrative Region are simple and quick. Business registration requires only three steps to get a company license. After submitting an online application to set up a company, the relevant certificate will generally be issued within one hour. It takes 4 working days if you submit an application for the certificate in paper form.

Business registration conditions are relaxed. There is no restriction on the amount of registered capital of the company in Hong Kong SAR law. It only needs to pay a 0.1% tax, and there is no capital verification. There is no limit on the amount of funds available. After the establishment of the company, the registered capital can also be arbitrarily increased, provided that a general meeting must be held and By passing the resolution to increase the registered capital, the resolution is then submitted to the Hong Kong Companies Registry together with the appropriate form and the appropriate fee.

Regulatory norms for investment companies. The Hong Kong SAR implements “national treatment” for foreign investment, manages the company based on laws and regulations such as the “Company Law” and “Bank Regulations,” and regulates and restricts corporate behavior. In addition to legal system management, Hong Kong also exercises self-discipline through civil organizations such as trade associations and chambers of commerce.

Singapore has a stable political environment, superior geographical location, complete infrastructure and a full English language environment, and the integrated business environment is extremely advantageous. In the “2014 Doing Business Report” released by the World Bank, Singapore’s business environment ranks first in the eighth consecutive year in the world’s 189 economies. The specific performance is: simple enterprise registration, loose registration conditions, and no over-constraints on business activities in daily management.

Business registration is easy. Registration procedures at Singapore companies are simple and inexpensive, attracting a large number of multinational companies. Adults of any nationality (18 years of age or older) need only provide a registered address in Singapore, appoint a Singapore director, a local secretary, and provide the company name, company’s articles and details, identity certificate, registered company address and office hours. With the report form, company registration can be completed within 3 working days. If it is a registered office or office, simply download the registration form from the Singapore International Enterprise Development Agency website and register online. The Singapore Business Registration Authority is the only competent authority for business registration. All companies are required to apply for registration with the Commercial Registration Office. Except for industries such as banking, finance, insurance, securities, communications, and communications, and production industries that have an impact on the environment, they must apply for permission from other government departments. Other businesses and companies need only register through the Commercial Registration Bureau to conduct business.

The requirements for registered capital are loose. The Singapore company law provides that the company’s minimum registered capital is 100,000 Singapore dollars and the subscription system is implemented. Shareholders can decide to increase their registered capital and paid-up capital at any time, and only need to complete the form and pay the fees in the Singapore Business Registration Authority.

In daily management, there is no over-constraining of business activities. After the registration of enterprises in Singapore, the day-to-day supervision, such as labor protection, intellectual property rights, environmental protection, and other aspects of supervision rely entirely on a sound legal system. The government does not perform routine administrative management of enterprises. Singapore implements an annual report system. Companies need to submit annual reports within one month of the shareholders’ general meeting and submit audited financial statements. The government’s understanding of the business operations of the company mainly comes from the company’s annual report.

Second, there is a big gap between investment liberalization and the international advanced level.

The Shanghai Free Trade Zone has implemented negative list management in terms of investment access, but the items listed in the negative list need to be further simplified. The reform of overseas investment management system for enterprises in the free trade zone is still in its infancy, and the management of overseas investment records has begun to implement. However, the cross-border investment management system, promotion system, and supporting service system need to be further established and improved in the anti-monopoly and national security review. The supervision of the field needs to be further improved.

Hong Kong has an open investment system. Foreign and local investors are treated equally without discrimination. For its business activities, the government neither interferes nor has any subsidy policies. As long as it complies with Hong Kong laws and regulations, it can invest in any industry. The specific performance is as follows: the degree of openness of industry access is high, and actively seek opportunities for foreign investment.

The openness of industry access is high. In all commercial activities permitted by current laws of the Hong Kong Special Administrative Region, there is theoretically no industry that completely prohibits private and external investors from participating, and there is no restriction on the proportion of holdings. All investors in or outside Hong Kong can achieve 100-holding. However, in many industries that are allowed to operate, the gambling industry is the industry that is most strictly regulated by the government. A few industries, such as telecommunications and broadcasting, have access to conditions. The Hong Kong SAR Government does not have uniform legislation to provide for entry conditions for all legitimate industries. However, various industries, including telecommunications, broadcasting, transportation, energy, liquor sales, restaurants, medicine and finance, etc., have to be Relevant government departments separately apply for licenses of related industries. Apart from a few industries such as banking and insurance, in general, the government does not rigidly require the entry conditions of the license industry.

Actively seek opportunities for overseas investment. As an international financial center, the Hong Kong SAR has a free flow of funds and a flexible fund-raising approach. It has gathered large financial institutions from all over the world. Its branches are distributed all over the world and can provide Hong Kong with comprehensive buyer credit, project financing, and leveraged buyouts in its outbound investments. Fund settlement and other financial services. At present, Hong Kong does not impose special restrictions on overseas investment. On the contrary, the Investment Promotion Department established by the Hong Kong SAR Government in 2007 also provides assistance to local companies and mainland companies in cooperating in overseas investment, including providing information and participating in investment. Public services such as fairs.

The opening up of foreign investment in Singapore has no restrictions on the business scope of the company and encourages companies to invest abroad. In addition to defense-related industries and individual special industries, Singapore has no industry restrictions on the entry of foreign capital, and markets such as commerce, foreign trade, leasing, marketing, and telecommunications are completely open. However, foreign investment in certain areas such as finance, insurance, and securities needs to be filed with the competent authorities. Singapore has also formulated a series of policies to support and encourage local enterprises to invest abroad, such as overseas business incentive plans, international roadmap plans, and double taxation plans for overseas investments.

Foreign investment access is open. Singapore has no restrictions on the way foreign investment enters. In addition to defense-related industries and individual special industries, Singapore has no industry restrictions on the entry of foreign capital, and markets such as commerce, foreign trade, leasing, marketing, and telecommunications are completely open. However, foreign investment in certain areas such as finance, insurance, and securities needs to be filed with the competent authorities. Singapore has banned new foreign banks from entering the local retail business market, limiting the proportion of foreign banks holding shares in local banks, and the proportion of foreign investment in journalism and broadcasting cannot exceed 30% and 49%, respectively. In addition, Singapore has no restrictions on foreign ownership. The Singapore government has also formulated a number of measures such as chartered international trade plans, business headquarters awards, business headquarters awards, multinational business headquarters awards, and other measures to encourage foreign companies to set up headquarters or regional headquarters in Singapore. By the end of 2012, more than 4,000 multinational companies had set up regional headquarters in Singapore. Singapore has no restrictions on the business scope of the company. For statistical needs, Singapore divides its business scope into categories such as services, commerce, technology, food, and trade. However, regardless of the company’s name, as long as it is legal, the company is free to conduct any business, and According to their own conditions and market conditions, they can change their business scope without approval.

Encourage enterprises to invest overseas. Singapore is not only highly open to foreign capital, but also encourages domestic companies to invest abroad. Singapore…

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