China allow wholly foreign-owned ecommerce companies in Shanghai Free Trade Zone

Foreign ecommerce companies will now be allowed to operate in Shanghai’s Free Trade Zone without needing a local partner.

An article published on 14th January on TECHINASIA that China’s Ministry of Industry and Information Technology (MIIT) announced, that the country is loosening regulations in its Shanghai Free Trade Zone, and will now permit wholly-foreign-owned companies to operate within that zone in the “online data processing” and “transaction handling” industries. The announcement specifically states that this includes ecommerce companies.

Until now, Chinese regulations have restricted foreign access to many technology-related industries, requiring foreign tech companies to form joint ventures with local partners to release their products in China. Even in the Shanghai Free Trade Zone, those rules have persisted – they’re the reason Microsoft and Sony were both forced to choose local partners to launch their game consoles, for example. But today’s announcement opens the door completely for foreign ecommerce firms that would rather go it alone.

Of course, this new freedom is still just a trial run. MIIT’s announcement also asks Shanghai’s government to take care in guiding and overseeing foreign-owned companies taking advantage of the new rules. If things go poorly, MIIT might well shut the experiment down. And of course, there are often good reasons for foreign companies to choose a local partner even if it isn’t required by law: China’s ecommerce market is different from many others, and foreign companies that tried to go it alone in the internet’s early days failed pretty miserably.

Still, the change represents a pretty exciting opportunity for foreign ecommerce companies, even if China’s ecommerce market is already dominated by some pretty powerful players.


Shanghai FTZ’s new financial regulations expected to benefit companies

According to CCTV News, Shanghai’s Pilot Free Trade Zone confirmed new international finance regulations on 1st August that are expected to be a significant boost to companies in the zone.

The Shanghai Free Trade Zone encourages cross-boarder cash flows. Because in the FTZ, companies are able to borrow RMB from the international marketplace, and that gives them lower costs and simpler operations.

The new FTZ regulations taking effect on 1st August allow businesses within the zone to finance offshore after simply filing out one document. They may borrow RMB in Hongkong, for example, at the Hong Kong interest rate of around 3%, which is about HALF the rate in the Chinese Mainland. It’s a big step for cross-border finance in China.

“The Regulations allow companies in the zone to borrow RMB overseas and use the money in the Free Trade Zone. Once these companies have registered Free Trade Accounts, the RMB they borrowed from other countries may even be used to supplement other businesses, even if they’re not in the Free Trade Zone.” Said professor He Xiaoyong, associate Director of Institute of China FTZ Law.Continue reading