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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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MUFG Bank (China) Regulation Newsletter November 11, 2019, Issue 31
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
MUFG Bank (China) Regulation Newsletter November 11, 2019, Issue 31
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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
MUFG Bank (China) Regulation Newsletter November 11, 2019, Issue 31
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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
Easing of entry conditions for multinational corporations seeking to
use centralized operation and management of foreign currency funds
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
Easing of entry conditions for multinational corporations seeking to
use centralized operation and management of foreign currency funds
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.
MUFG Bank (China) Regulation Newsletter November 11, 2019, Issue 31
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