the state council of the people’s republic of china releases … · 11-11-2019 · for the...

MUFG Bank (China) Regulation Newsletter November 11, 2019, Issue 31

MUFG Bank (China), Ltd. A member of MUFG, a global financial group

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The State Council of the People’s Republic of China Releases Master Plan for the Establishment of Six New Free Trade Zones (Shandong, Jiangsu, Guangxi, Hebei, Yunnan, and Heilongjiang)

On August 26, 2019, the State Council of the People’s Republic of China approved1 and released a master

plan2 for the establishment of six new Free Trade Zones (FTZs) in Shandong, Jiangsu, Guangxi, Hebei, Yunnan,

and Heilongjiang.

1 Response Regarding the Approval of the Establishment of Six New Free Trade Zones (Guohan [2019] No. 72)

2 Notice of Issuance of the Master Plan for the Establishment of Six New Free Trade Zones (Guofa [2019] No. 16)

1. Background of the Policy

Since the establishment of the inaugural FTZ in September 2013, China has established FTZs in five phases

(including this time). In this fifth phase, new FTZs will be established in Shandong, Jiangsu, Guangxi, Hebei,

Yunnan, and Heilongjiang, distributed across the northeastern seaboard, the Jing-Jin-Ji (Beijing-Tianjin-Hebei)

region, and the nation’s land borders. Based on the strategy of opening up to the world, the initiative will

conduct contrasting and complementary trials in the regions to explore methods of differentiation across a

greater scope, range, and diversity of fields than before. China is believed to be doing this with the aim of

stimulating high-quality development.

Since September 2013, China has established FTZs in five phases (including this phase).

With the establishment of six new FTZs at this time, there will be a total of 18 FTZs across China.

Summary

China Business Solution Office

RMB Internationalization Business Promotion Office



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2. Main Contents of the Announcement

(1) According to a regular policy briefing of the State Council, the six FTZs will have differing roles.

No. FTZ Role

1 Shandong

Through accelerating the continuing shift from old to new economic growth drivers,

this FTZ will promote ways to develop a high-quality marine economy, deepen

economic cooperation between China, Japan, and South Korea, and promote the

establishment of a new base for opening up to other countries.

2 Jiangsu

This FTZ will deepen industrial structural reforms and the strategy of

innovation-led development to build an open economy and conduct trials for the

development of the real economy and industrial transformation through innovation.

3 Guangxi

This FTZ will deepen opening up to and cooperation with ASEAN economies and

promote building itself into a new international land-and-sea trade corridor to

foster development and opening up in regions close to the national borders,

thereby forming an important gateway that serves to effectively link the Maritime

Silk Road and the Silk Road Economic Belt.

4 Hebei

This FTZ will contribute to the coordinated development of Beijing, Tianjin, and

Hebei and promote the high-quality development of the Xiong’an New Area. With a

primary focus on the development of high-end and high-tech industries, it will

create an important international commercial trade and logistics hub, a new

industrialized base, a base for global innovation, and an area at the forefront of

opening up and development.

1st Phase Shanghai

2nd Phase Tianjin, Fujian, Guangdong,

(Shanghai FTZ expanded)

3rd Phase Liaoning, Shaanxi, Henan,

Hubei, Zhejiang, Chongqing, Sichuan

4th Phase Hainan, (Established Lingang

New Area in Shanghai FTZ)

5th Phase Shandong, Jiangsu, Guangxi,

Hebei, Yunnan, Heilongjiang



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5 Yunnan

Through cooperation and development with neighboring countries including

Vietnam, Laos, and Myanmar, this FTZ will establish itself as an important base

connecting south Asian and southeast Asian corridors, and will promote the

formation of a hub that opens China to south and southeast Asia.

6 Heilongjiang

This FTZ will promote the full-scale revitalization of northeast China and strive to

achieve industrial structural reforms. It will build itself as a central base for

regional cooperation with Russia and northeast Asia through establishing itself as a

hub for transportation and logistics with the neighboring countries and enhancing the

level of openness in regions along its national borders.

(2) Beginning on the next page, we will outline key information including the areas of operation and the

designated functions for each of the six new FTZs.

China (Shandong) Pilot Free Trade Zone

Name Size Functions

Areas

Jinan Area 37.99 km2

Place focus on the development of AI, industrial finance,

medical/healthcare, cultural industries, and IT. Launch a comprehensive

pilot program for a new, open-economy system. Build the area as an

important regional economic center, a logistics center, and a science and

technology innovation center.

Qingdao

Area 52 km

2

Place focus on the development of industries including modern maritime,

international trade, marine logistics, modern finance, and advanced

manufacturing. Build the area as an international shipping hub for

northeast Asia, a key innovation center on the northeastern seaboard, and

a model development zone for the maritime economy. Focus on

establishing Qingdao as a pillar city on the Chinese coast.

Yantai Area 29.99 km2

Place focus on the development of high-end equipment manufacturing,

new materials, next-generation IT, energy conservation and

environmental protection, biomedical products, and production-related

services. Build the area as a leading region for China–South Korea

cooperation on trade and investment, a base for smart maritime

manufacturing, and a model zone for national science and technology as

well as international technology transfer.

Map



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China (Jiangsu) Pilot Free Trade Zone

Name Size Functions

Areas

Nanjing

Area 39.55 km

2

Build the area as a pilot region for self-reliant innovation which has a

global influence, as a model zone for modern industry, and as an important

platform for opening up and international cooperation.

Suzhou Area 60.15 km2

Build a top-class high-tech industrial park. Build the area as a base for

economic opening up on all fronts, a center for global innovation, a center

for high-end industry, and a center for modernized management.

Lianyungang

Area 20.27 km

2

Build the area as a major international transportation hub for Asia and

Europe, as an open gateway in which high-quality elements are

concentrated, and as a platform for exchange and cooperation between

countries (and regions) along the Belt-and-Road routes.

Map



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China (Guangxi) Free Trade Zone

Name Size Functions

Areas

Nanning

Area 46.8 km

2

Place focus on the development of modern service industries including

modern finance, smart logistics, the digital economy, and cultural media.

Build the area as a core gateway for financial opening up to ASEAN

economies and as an important base for international land-and-sea trade.

Qinzhou

Area 58.19 km

2

Place focus on the development of industries including marine and aerial

logistics, international trade, green chemicals, core parts for new energy

vehicles, electronic information, and biomedicine. Build the area as a

gateway port for new international land-and-sea trade corridors and as a

maritime economy cluster zone.

Chongzuo

Area 15 km

2

Place focus on the development of cross-border trade, logistics, finance,

tourism, and labor cooperation. Create a model zone for cross-border

industrial cooperation and build the area as a gateway for land routes of

international land-and-sea trade.

Map



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China (Hebei) Pilot Free Trade Zone

Name Size Functions

Areas

Xiong’an

Area 33.23 km

2

Place focus on the development of industries including next-generation

IT, modern life sciences and biotechnology, and high-end modern

services. Build the area as a leading area for high-end, high-tech industry

openness and development, as a model zone for the development of

digital businesses, and a leading area for financial innovation.

Zhengding

Area 33.29 km

2

Place focus on the development of industries including aviation,

biomedicine, international logistics, and high-end equipment

manufacturing. Build the area as a centralized zone for the opening up and

development of the aviation industry, a leading zone for openness and

innovation in the biomedical industry, and a comprehensive logistics hub.

Caofeidian

Area 33.48 km

2

Place focus on the development of industries including international

commodity trade, aerial and maritime cargo services, energy storage and

distribution, and high-end equipment manufacturing. Build the area as a

leading region for economic cooperation in northeast Asia and as a model

zone for innovation in the port economy.

Daxing

Airport

Area

19.97 km2

Place focus on the development of industries including aerial logistics,

aviation technology, and finance leasing. Build the area as a region

holding the functions of an international communications center, as a

leading area for national aviation science and technology innovation, and

as a model zone for the coordinated development of Beijing, Tianjin, and

Hebei.

Map



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China (Yunnan) Pilot Free Trade Zone

Name Size Functions

Areas

Kunming

Area 76 km

2

Enhance coordinated development with the Kunming Airport Economic

Zone. Place focus on the development of industries including high-end

manufacturing, aerial logistics, the digital economy, and the headquarters

economy. Build the area as a hub interconnecting south Asia and southeast

Asia, as well as a center for information distribution and a center for

cultural education.

Honghe

Area 14.12 km

2

Strengthen the coordination between the Honghe Comprehensive Bonded

Zone and the Mengzi Economic and Technological Development Zone.

Place focus on the development of industries including processing and

trade, healthcare services, international travel, and cross-border

e-commerce. Make full efforts to build the area as a processing and

manufacturing hub targeting ASEAN markets, a trade and logistics center,

and a model innovation zone for China-Vietnam economic coordination.

Dehong

Area 29.74 km

2

Place focus on the development of cross-border industries including

e-commerce, cooperation on production capacity, and finance. Build the

area as a leading area for opening up border regions and as a gateway for

China-Myanmar economic coordination.

Map



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China (Heilongjiang) Pilot Free Trade Zone

Name Size Functions

Areas

Harbin

Area 79.86 km

2

Place focus on the development of industries including next-generation IT,

new materials, high-end equipment, strategic emerging industries such as

biomedical goods, and modern service industries including science and

technology, finance, and cultural tourism. Also place focus on the

development of the economy of the cold regions. Build the area to provide

a focus point for comprehensive cooperation with Russia and northeast

Asia, and as a national logistics hub for both domestic and Eurasian goods.

Build the area as a cornerstone and model zone for the overall

revitalization of Northeastern China.

Heihe Area 20 km2

Place focus on the development of industries including the cross-border,

integrated utilization of energy and resources, natural foods, commercial

trade logistics, tourism, health, and cross-border finance. Build the area as

a cross-border industrial cluster and a model zone for border cities. Build

the area as a logistics hub on the national border and a major center for

China-Russia exchange and cooperation.

Suifenhe

Area 19.99 km

2

Place focus on the development of import processing for materials

including wood, grain, and clean energy, as well as the development of

trade finance and modern logistics service industries. Build the area as a

hub for the import/export and storage/transportation of goods, and as a

national logistics hub with a land border port-of-entry for international

land and sea trade corridors. Create an important platform for strategic

China-Russia collaboration as well as for opening up to and cooperating

with northeast Asia.

Map



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(3) The primary duties and measures for openness reforms in financial fields for this fifth phase of FTZ

establishment are outlined below.

Primary Duties and Measures for Openness Reforms in Financial Fields for the 5th Phase FTZs

No. FTZ Field Primary missions and measures

1 Shandong

Expanding the

cross-border use of

renminbi

Repatriation of renminbi back into the region through capital account

trading

Cross-border renminbi pooling by multinational companies

Issuance of foreign renminbi loans by banks within the FTZ

RMB-denominated settlement of cross-border asset assignments by

financial institutions in the FTZ

Promoting the

simplification of

cross-border

investment and

lending

Trial of reforms to simplify payments under the capital account

Revenue from trade in goods of cargo trade companies in the FTZ

with Class A status from SAFE may be deposited directly into

settlement accounts classified as current accounts

Trial of qualified domestic limited partnerships (QDLPs) in the FTZ

Establishment of foreign-invested (FIE) financial institutions in the

FTZ

Establishment of fund companies exclusively for domestic equity

investment

Establishment and management of renminbi equity investments and

corporate investment funds within the FTZ by foreign equity

investment management institutions and foreign-investment

management institutions

Investigation of

financial reforms

Trial of comprehensive financial management

Trial of debt and equity-related operations by local subsidiary banks

Secondary market funds for private equity investment

Intellectual property rights insurance

Innovation and reform of fund management services

Foreign investment through insurance firms and institutions in the

FTZ

Establishment of finance leasing company subsidiaries exclusive to

the FTZ

Expansion of financing functions from right of pledge established by

warehouse receipts to enable more complete confirmation, etc. of

warehouse goods rights related to financing based on warehouse

receipts rights of pledge

2 Jiangsu

Increased opening

up to abroad of the

financial sector

Establishment of financial institutions including joint Chinese-foreign

banks, private banks, insurance firms, securities firms, publicly

offered fund firms, and licensed asset management firms

Establishment of insurance asset management firms

Offshore insurance operations

Simplification of foreign exchange for investment and lending

Direct participation by the foreign shareholders of listed companies in

the FTZ in such companies’ rights offerings



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Direct participation by employees with foreign citizenship in the

equity incentive plans of companies listed in China

Enhancing financial

support for the real

economy

Development of supply chain finance

Trial of support tools for bond and equity financing

Trial transfer of the foreign debt deregistration process to banks

Expansion of trial scope for the simplification of converting payments

to RMB for capital account revenue

Innovations in green financial products and services

Innovations by insurance companies of their products and services in

order to provide insurance for the energy and chemical industries, etc.

Promoting support

for

science/technology

innovations in

finance

Establishment of bi-directional cross-border equity investment funds

Trial of government investment funds exiting from investment in

science and technology firms in the seed and startup phases

Exit and profit-sharing mechanisms for government investment funds

Pilot qualified domestic investment enterprise (QDIE) program

Development of private investment fund services for funded cities

within the FTZ

3 Guangxi

Creating an open

financial gateway to

ASEAN economies

Financial reforms focused on having the renminbi used across the

ASEAN region

Trading of renminbi and ASEAN national currencies via the interbank

market

Promotion of the establishment of private enterprise equity

investment support tools by institutions including private fund

managers, securities firms, commercial banks, and financial asset

investment firms

Promotion of the establishment of financial institutions such as

private banks within the FTZ

Fostering the growth of finance leasing agencies

Promoting the

simplification of

cross-border

investment and

lending

Issuance of offshore renminbi loans by banks in the FTZ

Support for the offshore issuance and repayment of renminbi bonds

by financial institutions and corporations

Transfer of non-performing assets to foreign banks through a financial

equity trading platform in the FTZ

Easing of entry conditions for multinational corporations seeking to

use centralized operation and management of foreign currency funds

Expansion of companies using capital account foreign currency funds

for conversion to renminbi

Issuance of renminbi bonds within the FTZ by a company’s overseas

parent

Offshore borrowing in renminbi by cross-border e-commerce firms

RMB-denominated settlement for business activities by cross-border

e-commerce firms

4 Hebei Enhancing financial

service functions

Registration and establishment of financial asset investment

subsidiaries by commercial banks



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Establishment of direct-to-consumer banks and of credit rating

institutions

Establishment of insurance institutions, such as health insurance

agents, exclusively for FIEs

Trial of qualified foreign limited partner (QFLP) and qualified

domestic investment enterprise (QDIE) operations, easing of

restrictions and raising of the fund equity ratio for project investment

Deepening of

foreign currency

management

structural reforms



Entry into the interbank foreign currency market by finance leasing

firms and commercial factoring firms

Removal of the need for companies engaged in trade in goods with

“Class A” status from SAFE to open accounts for cargo trade revenue

transactions awaiting inspection

Promoting

innovation in

cross-border

renminbi operations

Issuance of offshore renminbi loans by banks in the FTZ, exploration

of cross-border transfer methods for domestic renminbi trade finance

assets

Issuance of renminbi bonds within China by a company’s overseas

parent

5 Yunnan

Increased opening

up to abroad of the

financial sector

Establishment of branches of national financial institutions from south

Asia and southeast Asia (excluding institutions managing securities

and commodities)

Development of factoring business across the region by factoring

firms in the FTZ

Expanding the scope of benefits from “bank and tax coordination”

Concluding of agreements with south Asian and southeast Asian

nations on mutual supervisory coordination and collaboration for the

insurance industry to optimize cross-border insurance regulations and

achieve rights to mutual assignment of compensation claims

assessments or mutual approval of assessment results

Promoting

innovation in and

development of

cross-border

renminbi operations

Setting of renminbi as the cross-border trade and investment

denomination as well as the currency of settlement

Promotion of cross-regional transactions in the interbank market by

financial institutions using renminbi and non-major international

reserve currencies of neighboring nations

Issuance of renminbi bonds in China by a company’s foreign parent

Procurement of renminbi funds from offshore by financial institutions

or companies

Development of offshore renminbi funds

Promoting the

simplification of

cross-border

investment and

financing

Development of cross-border financing by banking financial

institutions

Cooperation by banks and non-bank institutions licensed for

settlement operations on cross-border settlements with overseas banks

and settlement organizations, through clearing organizations which



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hold legal operational capacity



Development of domestic and international leasing through financial

leasing companies and finance-leasing companies.

6 Heilong-

jiang

Promoting

innovation in

cross-border

renminbi operations

Trial of simplification of conversion of capital account foreign

currency revenue into renminbi for direct investment, foreign debts,

and overseas market listing

Permission for non-bank settlement institutions to open cross-border

renminbi reserve accounts at banks which have the capacity to operate

in the FTZ

Permission for financial institutions and companies to procure

renminbi funds from countries and regions including Russia

Support for domestic and international financing by companies in the

form of third-party guarantees, domestic/international assets, and

offshore project mortgages

Enhancing financial

service functions

Clearing by banking financial firms of ruble cash positions with

Russian commercial banks for cross-border transportation

procurement funds

Trial participation by financial institutions in the FTZ in operations

including financial industry offshore financing, exchange contracts

to/from renminbi, renminbi-foreign currency swaps, and

renminbi-foreign currency options

3. Impact on Companies

This fifth phase of new FTZ establishment has given investors new investment opportunities. Measures

including simplifying the employment and activities of relevant investors have further improved the business

environment of these regions, pushing foreign investment and the regional economy to advance to the next

level.

The six FTZs established in this phase have each had unique roles and development targets attached to them.

Looking at the development of FTZs up to now, the planning of more open policies that harness the unique

characteristics of each zone could allow for companies to choose to operate in the FTZ that best suits their own

business development plans and benefit from the respective reform and openness incentives.

Going forward, each regional government is expected to release detailed procedural instructions based on the

State Council’s master plan. It can be said that the details of these instructions will determine how specific the

FTZ policies can be, and how much companies will be able to benefit from the FTZ reforms.

We will continue to follow up on relevant information and reveal the details as they come.



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the state council of the people’s republic of china releases … · 11-11-2019 · for the...

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