The future of the Free Trade Port: the “free trade port” policy of Hong Kong and Singapore

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The core of the FTA policy framework includes eight aspects: loose policy environment, open investment field, financial openness, trade liberalization, regulatory easing, and tax easing. The Shanghai Free Trade Zone policy still has a certain gap with Hong Kong and Singapore, especially It is the aspect of financial liberalization.

Foreword

On October 19th, Secretary Xi Jinping’s report on the 19th National Congress of the Communist Party of China proposed that “the free trade pilot zone should be given greater reform autonomy and explore the construction of a free trade port.”

On October 19th, Shanghai Municipal Party Committee Secretary Han was answering questions about the construction of the Pilot Free Trade Zone and planning the construction of 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 deepening of the free trade pilot zone program. This is version 2.0. In May this year, the Central Deep Reform Group officially approved the comprehensive deepening of the reform of the Shanghai Pilot Free Trade Zone. 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 nationwide. Regarding the free trade port, we are doing the plan according to the central government’s deployment. Now we are only in the planning stage, and the final plan must be implemented after the central government approves it.

On October 19th, the 21st Century Reporter interviewed Bai Ming, deputy director of the International Market Research Institute of the Ministry of Commerce, and Bai Ming mentioned:

As a kind of FTZ (Free Trade Zone Free Trade Zone), the free trade port is generally located in the transportation and logistics hubs such as ports. It is more convenient for foreign vessels to enter and exit freely, such as the entry and exit, loading and unloading, sorting and repackaging of foreign goods. , 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.

The “Reform and Deepening China (Shanghai) Pilot Free Trade Zone Reform and Opening Program” announced in the first half of this year also proposes to establish a free trade port area within the special customs supervision areas such as Yangshan Bonded Port Area and Shanghai Pudong Airport Comprehensive Bonded Zone. The highest level in the world, the implementation of higher standards of “first-line release”, “second-line safe and efficient management” trade supervision system. According to the plan, Shanghai’s free trade port area will, based on the effective prevention and control of port risks, rely on informational supervision means to cancel or minimize the trade control measures for goods entering the zone, and to simplify the first-line declaration procedures to the greatest extent. Explore and implement financial, foreign exchange, investment and immigration management systems in line with international practices, and 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 area in Zhoushan; Tianjin Port Free Trade Zone in Tianjin, Yantian Port in Shenzhen, these free trade The district itself has a port area. But whether there will be a special free trade port in the future will still need to be observed. Singapore and Hong Kong are two important reference standards. In recent years, China’s mainland has made rapid progress. The throughput and infrastructure of our inland ports are not worse than Singapore and Hong Kong. However, there are still gaps in management capabilities, management systems, efficiency and international services. After all, they started very early, and the entire opening of the Chinese mainland involves many innovations and changes in institutional mechanisms that require a process. However, as a free port, these two places have realized the transfer and weakening of many government administrative functions. In this respect, there may be some differences in the construction of free trade ports in the Mainland.

A free trade port overview

A free trade port is a form of a free trade zone. Generally speaking, a free trade port refers to a port area that is located outside the country and the region and outside the customs management level, allowing foreign goods and funds to enter and exit freely. All or most of the goods entering and leaving the port area are exempt from customs duties, and are allowed to carry out business activities such as free storage, exhibition, dismantling, modification, repackaging, finishing, processing and manufacturing of goods in 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, consisting of Hong Kong Island, Kowloon and the New Territories. After the Opium War in 1840, Hong Kong became a free port and pursued a free trade policy. Starting from entrepot trade, Hong Kong has now become a free port with a diversified economic structure.

In 1969, Singapore set the first free trade zone in Jurong Terminal in Jurong Industrial Zone, and now Singapore has gradually developed into a highly open trade free port. At present, there are 7 free trade zones in Singapore, one of which is mainly air cargo, the Changi Airport Free Trade Zone is managed by Changi Airport Group; the other 6 are mainly seaborne cargo, of which 5 are limited by Singapore Port Group. Company management, one managed by Jurong Port Private Limited. The seven free trade zones in Singapore are separated from the outside by fences. Access to the free trade zone is managed by the Customs inspection station. All personnel and vehicles must be inspected.

In March 2017, the “Reform and Deepening China (Shanghai) Pilot Free Trade Zone Reform and Opening Program” issued by the State Council mentioned that a free trade port was established in the special customs supervision areas such as Yangshan Bonded Port Area and Shanghai Pudong Airport Comprehensive Bonded Area. Area.

To the highest level of the international standard, the implementation of higher standards of “first-line release”, “second-line safe and efficient management” trade supervision system. Under the authorization of the state, the intensive management system will be implemented. Under the premise of effective prevention and control of port risks, relying on informational supervision means, the trade control measures for goods entering the zone will be cancelled or minimized, and the first-line declaration procedures will be simplified to the utmost extent. Explore and implement financial, foreign exchange, investment and immigration management systems in line with international practices, and establish and improve risk prevention and control systems.

2. Shanghai Free Trade Zone and Hong Kong and Singapore Freeport Policy Comparison

Note: The content of this section is not the view of Xingzheng Transportation. It is the article published by the Research Group of the International Trade and Economic Cooperation Research Institute of the Ministry of Commerce in 2014. The China (Shanghai) Pilot Free Trade Zone and the Hong Kong and Singapore Freeport policies of China and Learn from the perspectives in the study.

The Shanghai Free Trade Port is still in the planning stage, and there is no further information. We believe that it may be deepened on the basis of the current free trade pilot zone. Hong Kong and Singapore, as mature free trade ports, are generally the benchmark for international companies to formulate relevant policies and have a high reference significance.

In 2014, the research group of the International Trade and Economic Cooperation Research Institute of the Ministry of Commerce published an article entitled “China (Shanghai) Pilot Free Trade Zone and China Hong Kong, Singapore Freeport Policy Comparison and Reference Study”, which is also a key topic of Shanghai government decision-making consultation (2013- Part A-28) of research results. This article analyzes in detail the policies of Hong Kong and Singapore Freeport and the comparison with the Shanghai Free Trade Zone. We have compiled the main content of the article to help investors understand the relevant policies of overseas mature free trade ports.

The core of the FTA policy framework includes eight aspects, namely, loose policy environment, open investment, financial liberalization, trade liberalization, regulatory easing, tax easing, legal perfection, and freedom of movement of natural persons. The Shanghai Free Trade Zone policy has a certain gap with Hong Kong and Singapore in these eight aspects:

First, government functions need to be optimized.
The registration procedures for enterprises in the Shanghai Free Trade Zone have basically reached the international advanced level. The industrial and commercial registration “one-in-one acceptance”, the registration of registered capital, the “first license” and the annual report publicity system have been implemented, but the corporate tax burden is still high. There are still certain restrictions on the scope of business operations. The Shanghai Free Trade Zone is currently composed of four independent regions. The management structure is relatively complicated. The unified platform and coordinated supervision of the various administrative departments of the Free Trade Zone are still in their infancy. The convenience of natural persons is still far from the international advanced level.

The Hong Kong government implements a positive non-intervention policy, limiting government functions to the smallest possible extent and giving the market economy full freedom. In terms of market access, the Hong Kong SAR Government has excellent service efficiency and standardized management. The specific performance is as follows: high efficiency of enterprise registration, loose registration conditions, and regulation of investment enterprises.

Enterprise registration is efficient. The registration and registration procedures for companies in the Hong Kong SAR are simple and fast. Business registration requires only three steps to get a company license. Submitting an application online to set up a company will generally be issued within one hour. It takes 4 working days to submit the application by paper.

Enterprise registration conditions are loose. The laws of the Hong Kong Special Administrative Region have no restrictions on the amount of registered capital of the company. They only need to pay 0.1% of the stamp duty and do not need to verify the capital. The funds are not limited. The company can also increase the registered capital arbitrarily after the establishment of the company, provided that a general meeting of shareholders must be held. By adding a resolution to the registered capital, the resolution will be submitted to the Hong Kong Companies Registry together with the completed form and the appropriate fee.

Regulatory norms for investment companies. The Hong Kong Special Administrative Region (HKSAR) implements “national treatment” for foreign investment, and manages companies according to laws and regulations such as the “Company Law” and “Bank Regulations” to regulate and restrict corporate behavior. In addition to legal management, Hong Kong also conducts self-discipline through non-governmental organizations such as trade associations and chambers of commerce.

Singapore has a stable political environment, a superior geographical location, a sound infrastructure and a full English language environment. The integrated business environment is very advantageous. In the 2014 Business Environment Report released by the World Bank, Singapore’s business environment ranks first in the 189th consecutive year in 189 economies. The specific performance is as follows: the company has simple registration, loose registration conditions, and does not over-constrain business activities in daily management.

Business registration is easy. The registration process in Singapore is simple and inexpensive, attracting a large number of multinational companies. Any adult of any nationality (18 years of age or older), only need to provide a Singapore registered address, appoint a Singaporean director, a local secretary, and provide the company name, company charter and rules, identity certificate, company registration address and office hours. The report form can complete the company registration within 3 working days. If you are a registered representative office or an office, simply download the registration form from the Singapore International Enterprise Development Agency website to register online. The Singapore Business Registry is the sole authority for business registration. All companies are required to apply for registration with the Business Registration Office. Except for banking, finance, insurance, securities, communications and other industries and industries that have an impact on the environment, they need to apply for permission from other government administrations. Other commercial organizations and companies can only conduct business through registration with the Commercial Registration Office.

The requirements for registered capital are loose. The Singapore Companies Act provides for the establishment of a company with a minimum registered capital of S$100,000 and a subscription system. Shareholders can decide to increase their registered capital and paid-up capital at any time, and only need to fill out the form and pay the fees at the Singapore Business Registry.

In the daily management, there is no excessive restriction on business activities. The daily supervision of enterprises after completion of registration in Singapore, 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 carry out regular administrative management of enterprises. Singapore implements an annual report system. Enterprises need to submit annual statements in accordance with regulations within one month after the general meeting of shareholders, and submit audited financial statements. The government’s understanding of business operations is mainly from the company’s annual report.

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

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

Hong Kong has an open investment system that treats foreign and local investors equally without any discriminatory measures. The government does not intervene or subsidize its business activities. As long as it complies with Hong Kong laws and regulations, it can invest in any industry. The specific performance is: the openness of industry access is high, and actively seek foreign investment opportunities.

The openness of industry access is high. In all the commercial activities allowed by the current laws of the Hong Kong Special Administrative Region, there is no theoretically completely banned private and foreign investors from participating in the industry, and there is no restriction on the holding ratio. Investors in Hong Kong or overseas can achieve 100 holdings. But in many industries that allow operations, the gambling industry is the most regulated industry by the government. A small number of industries, such as telecommunications and broadcasting, have conditions to enter. The Hong Kong SAR Government does not have uniform legislation to restrict entry conditions for various legal industries. However, in many industries, including telecommunications, broadcasting, transportation, energy, liquor sales, restaurants, medicine and finance, in addition to commercial registration, The relevant government departments apply for a license for the relevant industry. In addition to a few industries such as banking and insurance, in general, the government does not have the mandatory entry requirements for the license industry.

Actively seek opportunities for foreign investment. As an international financial center, the Hong Kong SAR has free financial flows and flexible financing methods. It has gathered large financial institutions from all over the world. Their branches are spread all over the world and can provide comprehensive buyer credit, project financing and leveraged buyouts for Hong Kong’s foreign investment. A variety of financial services such as fund settlement. At present, Hong Kong does not impose special restrictions on overseas investment. On the contrary, the Investment Promotion Agency established by the Hong Kong SAR Government in 2007 also provides assistance for local companies and mainland companies to cooperate with each other in overseas investment processes, including providing information and participating in investment. Public services such as fairs.

Singapore’s foreign investment access is open, there is no limit to the business scope of the company, and enterprises are encouraged to invest abroad. In addition to defense-related industries and individual special industries, Singapore has no industry restrictions on foreign investment. Commercial, foreign trade, leasing, marketing, telecommunications and other markets are completely open, but foreign investment in special fields such as finance, insurance, and securities needs to be filed with the competent authorities. Singapore has also developed a series of policies to support and encourage local companies to invest abroad, such as the overseas corporate rewards program, the international roadmap plan, and the overseas investment double tax deduction plan.

Foreign investment is open. Singapore has no restrictions on the way foreign investors invest. In addition to defense-related industries and individual special industries, Singapore has no industry restrictions on foreign investment. Commercial, foreign trade, leasing, marketing, telecommunications and other markets are completely open, but foreign investment in special fields such as finance, insurance, and securities needs to be filed with the competent authorities. Singapore prohibits the addition of foreign banks into the local retail business market, restricting the proportion of foreign banks holding shares to local banks. The foreign investment in journalism and broadcasting should not exceed 30% and 49% respectively. In addition, Singapore has no restrictions on the proportion of foreign capital. The Singapore government has also developed a number of franchise 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 established regional headquarters in Singapore. Singapore has no restrictions on the scope of business. For statistical purposes, Singapore divides its business scope into service, business, technology, food and trade categories, but regardless of the company name, as long as it is legal, the company is free to operate any business, and You can change your business scope according to your own situation and market conditions, without approval.

Encourage enterprises to invest abroad. Singapore is not only highly open to foreign capital, but also encourages domestic companies to invest abroad. Singapore’s foreign investment promotion business is headed by the International Enterprise Development Agency, a statutory body under the Ministry of Trade and Industry.

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