**Abstract**
According to reports from journalists, the Shanghai Free Trade Zone's construction plan includes a list of service industry opening measures proposed by relevant parties. This list covers 19 industries across six major sectors. The scope of these openings is largely based on existing laws and regulations, with some provisions being more progressive. It is expected that the process will be gradual and carefully managed.
In the financial services sector, it is recommended that qualified foreign financial institutions be allowed to establish foreign banks, and that eligible private capital and foreign institutions jointly set up Sino-foreign joint venture banks. When conditions permit, a limited license bank model may be piloted within the zone.
Additionally, under improved regulatory frameworks and enhanced oversight, Chinese banks in the region could be permitted to engage in offshore operations.
Although the Shanghai Free Trade Zone has been approved for several days, no official rules have yet been released. However, according to sources, the zone is focused on institutional innovation. The proposal submitted to the central government outlines nine key measures across four main areas: investment, trade, finance, and administration. In summary, this approach is referred to as “one simplification and six freedoms,†aiming to streamline administrative procedures and grant enterprises greater flexibility in trade, movement of people and goods, service access, currency circulation, and storage.
In the investment field, the zone is focusing on two key innovations. One is the introduction of a negative list management model for investments, alongside the implementation of pre-entry national treatment. This means that companies registered in the zone would only need to list the activities not permitted under Chinese law, while all other operations would be allowed. This represents a significant policy shift and is one of the reasons why the NPC Standing Committee is considering suspending three foreign-related economic legal motions in the area.
For foreign investment, a filing-based management system will be implemented, along with a general filing process for overseas investments to ensure convenience. The zone also encourages the establishment of project companies focused on overseas equity investments and supports qualified investors in setting up overseas investment funds.
In the trade sector, multinational corporations are encouraged to establish Asia-Pacific regional headquarters and integrated operational centers for trade, logistics, and settlement. The zone aims to deepen the pilot program for international trade settlement centers and expand cross-border payment and service functions through special accounts. Enterprises in the zone are also supported in conducting offshore business, and there is an emphasis on integrating domestic and international trade.
The zone is also working to improve shipping services, accelerate the development of freight index derivatives trading, promote transit consolidation, and test coastal shipping routes between domestic ports and Shanghai. Simplified licensing processes for international ship transportation are also being considered.
In the financial sector, under the premise of risk control, the RMB capital account convertibility will be tested. The zone will work toward market-driven interest rates and allow the use of RMB in cross-border transactions. It will also explore reforms in foreign exchange management, aiming to create a system compatible with the free trade zone’s goals and enhance trade and investment facilitation.
Furthermore, the zone will encourage enterprises to utilize both domestic and international markets for cross-border financing and will deepen foreign debt management reforms. It will also support the establishment of regional or global fund management centers for multinational corporations and link financial innovation in the zone with the development of Shanghai as an international financial center.
Financial services will be gradually opened to eligible private capital and foreign institutions, with support for foreign banks and Sino-foreign joint ventures. Financial markets will be allowed to establish internationally oriented trading platforms, and foreign companies may eventually participate in commodity futures trading. Product innovation in financial markets will be encouraged, and equity escrow institutions will be supported in creating integrated financial service platforms.
Finally, the zone will support the development of RMB cross-border reinsurance and help build a stronger reinsurance market.
In the administrative domain, the zone is deepening reforms to simplify approval procedures and implement a more efficient service model, including centralized processing and inter-departmental collaboration through an information network platform.
**Shanghai Free Trade Zone Will Allow RMB Capital Account Convertibility**
On September 5th, a draft of the overall plan for the Shanghai Free Trade Zone was obtained by Sina Finance. According to the document, the zone will accelerate financial system innovation, and under the premise of risk control, the RMB capital account will be tested for convertibility.
The plan highlights several key financial innovations, including RMB internationalization and foreign exchange reform. Under controlled conditions, the zone will first experiment with RMB capital account convertibility, allowing financial market interest rates to be market-driven. Financial institutions’ asset pricing will also be market-oriented. The cross-border use of RMB will be explored first.
The document also states that the Shanghai Free Trade Zone will pilot international foreign exchange management reforms, establishing a system compatible with the free trade zone’s objectives. This will aim to fully realize trade and investment facilitation.
Moreover, the zone will encourage enterprises to leverage both domestic and international resources, promoting cross-border financing liberalization. It will deepen foreign debt management reforms and promote more flexible cross-border financing.
The zone will also continue to develop centralized foreign exchange fund management for multinational corporations and encourage the establishment of regional or global fund centers. A linkage mechanism between financial innovation and the development of Shanghai’s international financial center will be established.
In terms of financial services, the zone will open up to eligible private capital and foreign financial institutions, supporting the creation of foreign banks and joint ventures. Financial markets will be allowed to establish internationally oriented trading platforms. Foreign companies will be gradually permitted to participate in commodity futures trading, and product innovation in financial markets will be encouraged.
Equity escrow institutions will be supported in setting up integrated financial service platforms, and the development of RMB cross-border reinsurance will be promoted to foster a stronger reinsurance market.
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