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    Saturday 20 July 2019
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    China relaxes regulation on foreign investment in the Shanghai Free Trade Zone

    New measures are likely to result in an increase in foreign investment within the Shanghai Free Trade Zone (FTZ).
    Qualifying companies within the FTZ can now apply for centralised foreign currency management for group companies, both inside and outside of China. Approvals are no longer required. Additionally Foreign Invested Enterprises (FIEs) may now lend up to 50% (rather than 30%) of the value of the shareholder’s equity to its offshore parent company or another offshore group company. This provides an opportunity to repatriate more funds while deferring the withholding tax that would be charged if the funds were distributed as a dividend.
    Other changes include 14 new customs supervisory rules within the FTZ, providing the ability to declare goods after entry, rather than before entry. Changes to customs rules are expected to provide speedier customs clearance and lower logistics costs for importers.
    The updated 2014 Shanghai FTZ negative list now has 51 fewer FIE restrictions and notable improvements include removal of:
    • restrictions on foreign investment in banks and currency brokerages
    • minimum investment requirements for foreign investment in medical institutions
    • qualification requirements for investment in the certification services industry
    • joint venture requirements for foreign investment in international cargo handling or marine shipping container station and yard operations.
    Scott Heidecke of Nexia TS, a member firm of Nexia International comments: “China is delivering on the reform promises within the FTZ with the relaxation of more regulations, to spur foreign investment in the region. It now appears that the cautious ‘wait-and-see’ approach by foreign investors has given way to a belief in the reforms and their potential benefits.”
    During the first half of 2014, approximately 1,020 FIEs were successfully registered, accounting for over 20% of all new registrations, in contrast to just 6% in 2013.
    For more information, please contact:
    Scott Heidecke
    Nexia TS, China
    T +86 156 1833 1281
    E scott@nexiats.com.cn
    PR enquiries:
    Steve Smith
    Thirdperson Words
    T +44 7980 584049
    E stevesmith@thirdpersonwords.co.uk
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