FTZ moves to liberalize services trade

Shanghai's Pilot Free Trade Zone has adopted the negative list approach for investment in the services sector as part of China's opening-up reforms.

The China (Shanghai) Pilot Free Trade Zone yesterday for the first time released a negative list for the services sector, a major institutional innovation to further liberalize market access for foreign participation in sectors such as transportation, insurance and communication.

The move means overseas services and service providers investing in areas not listed will now be treated the same as domestic companies, reducing red tape and other restrictions.

Special regulations governing investment by foreign entities, such as requiring a Chinese joint venture partner, will continue to apply to those sectors on the negative list.

The reform by the Shanghai FTZ is the first such move in the country.

Based on the negative list, a total of 159 special administrative measures involving 31 industries in 13 sectors, among which cross-border financial services is a major aspect.

“Among the 159 special management measures, 31 belong to the financial sector, which include monetary and financial services, capital market services, insurance and other financial services,” said Li Jun, deputy director of the Shanghai Financial Service Office.

Others involve postal and courier services, culture, sports and entertainment, scientific research and technological services, leasing and commercial services, telecommunications, software and information technology services, wholesale and distribution services, water conservancy, environment and public facilities management, education, agriculture, forestry, animal husbandry, fisheries and residential services, construction, health and social services.

"The replacement of the traditional “case-by-case approval” model with the “pre-establishment of a national treatment + negative list” approach “is a meaningful institutional innovation which based in Shanghai but will benefit the whole country”, said Wu Qing, vice mayor of Shanghai.

Wu said the debut of the negative list is conducive to China’s active role in coping with changes in the international economic and trade pattern and its further integration into the global value chain.

“It is also conducive to the implementation of measures for China’s further opening-up and leading the innovation and development of trade in services.

“Last but not the least; it is conducive to deepening the reform and further opening-up of the Shanghai Free Trade Zone and improving the international competitiveness of trade in services.”

Wu emphasized that the move is a major support to efforts to accelerate the supply-side reform of trade in services, building a new open economic system, promoting the transformation and upgrading of foreign trade, and cultivating new driving force for economic growth.

“It is of great significance to make full use of the brand of 'Shanghai Service', improve service quality, enhance international competitiveness and optimize service environment,” Wu said.

The changes adopt international practice to define international trade in services in three areas: cross-border trade, consumption abroad and the presence of natural persons.

Trade in services has become a new engine for global trade growth. China’s trade in services totaled US$695.7 billion last year, the largest after the United States.

Shanghai’s trade in services totaled US$195.5 billion last year, leading the sector in the world's second largest economy. Services accounted for nearly 30 percent of the city’s foreign trade and was 14.6 percentage points higher than the national level.

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