NEW UPDATES IN CHINA (SHANGHAI) PILOT FREE TRADE...

NEW UPDATES IN CHINA (SHANGHAI) PILOT

FREE TRADE ZONE

&

BUSINESS OPPORTUNIES IN Yangtze Delta

SHANGHAI WAIGAOQIAO FREE TRADE ZONE UNITED DEVELOPMENT CO., LTD.

June 9th, 2015

2

Table of Contents

Policy Innovations in CSPFTZ 2

Business Opportunities 3

New Progress 1

Introduction of Our Company 4

New Progress

3

New Progress---- 4 composed parts, 120.72km2 China（Shanghai）Pilot Free Trade Zone - 28.78km2

A

A

A Shanghai Pudong Airport Free Trade Zone Land area ：3.59km2

A

A A

A

A

Shanghai Waigaoqiao Free Trade Zone Land area ：10km2

Yangshan Free Trade Port Area Land area ：14.16km2

Shanghai Waigaoqiao Bonded Logistics Park Land area：1.03km2

Expanded Areas of China（Shanghai）Pilot Free Trade Zone - 91.94km2

B

D

C

B

C

D Zhangjiang High-tech Zone Land area：37.2km2

Jinqiao Development Zone Land area：20.48km2

Lujiazui Financial Zone Land area：34.26km2

1

2

3

4

1 2

3

4

2013/9/29

2015/4/30

Establishment of Waigaoqiao Free Trade Zone

Establishment of Waigaoqiao Bonded Logistics Park

Establishment of Yangshan Free Trade Port Area

Establishment of Pudong Airport Free Trade Zone

Establishment of China (Shanghai) Pilot Free Trade Zone

New Progress---- Development Course

5

2015 Expansion of China (Shanghai) Pilot Free Trade Zone

2013

Waigaoqiao Free Trade Zone

New Progress---- Development Course

The Third Harbour District

The Second Logistics Park

Waigaoqiao FTZ

The First Logistics Park

The Fifth Harbour District

The First Harbour District

The Second Harbour District FTZ B Region

The Fourth Harbour District

The Sixth Harbour District

Inland river shipping area

Gaoqiao Town

Sunland·Waigaoqiao International Ecological

Harbour City

Innovation Park

New Progress---- As of March 31th 2015

7

Newly-established enterprises 17,045

Existed Company 25,941

Newly-established German Company 57

Employee 300,000

Foreign banks and domestic banks 47

enterprises

Enterprises

Enterprises

persons

banks

China (Shanghai) Pilot Free Trade Zone – before expanded


3005

14040

自贸区新设企业

外资新设企业

内资新设企业

Industrial Category

Service Industry

Others

Wholesale and Retail

Newly-Established Enterprises inside the CSPFTZ

Newly-Established Enterprises with Foreign Capital Newly-Established Enterprises with Domestic Capital


9

10

Policy Innovations of CSPFTZ

CSPFTZ Policy Innovation

Investment Management

Financial Regulations

Service Trade

Trade Supervision

China (Shanghai) Pilot Free Trade Zone

“New Elements”

11

CSPFTZ Policy Innovation----Investment Management

Foreign Investment Filing System

Procedures on the Administration of Filing Foreign-funded Enterprises Within the China (Shanghai) Free Trade Zone Procedures on the Filing Administration of Foreign Investment Projects Within the China (Shanghai) Pilot Free Trade Zone

12

Negative List Managing System

For industries not list in the negative list, the

establishment and alternation for foreign invested

companies was changed the approval system to the

filing system.

The filing process takes only 1 day.

Negative List 2013 Version

2014 Version

2015 Version

Restrictive and

Prohibited Measures

190 Items 139 Items 122 Items

Special Administrative Measures (Negative List) on Foreign Investment Access to the China (Shanghai) Pilot Free Trade Zone (2013) Special Administrative Measures (Negative List) on Foreign Investment Access to the China (Shanghai) Pilot Free Trade Zone (2014 revised)

13


2015 Version VS 2014 Version：

1. Further opening up： 17 items decreased

2. More transparent

3. Synchronized with the international regulations

14

Outbound Invest

Procedures of China (Shanghai) Pilot Free Trade Zone on Filing Administration of Investment in Businesses Overseas Procedures of China (Shanghai) Pilot Free Trade Zone on the Filing Administration of Overseas Investment Projects

Filing system for enterprises registered inside the Pilot Free Trade Zone to do general outbound investment.

The Filing Authority will issue the certificate for outbound investment approval document in 5 working days.

Projects below $300 million can be applied through filing system.


15


Total investment projects：280

Total investment：$ 9.039Billion

Overview Investment target countries

Advantages

shorter procedures

less authorities to go through

India 2 Indonesia 2 Canada 3 Israel 4 The U.K. 4 Australia 15 Singapore 17

U.S.A 37

The British Virgin Islands 40 Cayman Islands 53 Hong Kong 76

16

Through collaboration with banks, law firms, insurance companies and other institutions to build up an effective services platform, to provide investment consultancy services, FT account, filing application, legal, finance, insurance and other professional services via one platform.

The platform’s target clients are more than just UDC’s current clients, as well as partner firms’ current clients, and more companies that are willing to set up inside the Pilot Free Trade Zone.

Outbound Investment Service Platform

Website: www.shftz.cn


http://www.shftz.cn/

17

CSPFTZ Policy Innovation----Financial Regulations

Free Trade Account System

Cross-border RMB Borrowing

RMB Cash Pooling

RMB Netting Solution

Foreign Currency Cash Pooling

Interest Rate Liberalization

18

FTZ Domestic overseas

Free Trade Account

(FT)

Resident Free Trade Account (FTE)

Non-resident Free Trade Account

(FTN)

Overseas Account

Domestic Non-resident Account

(0SA/NRA)

Same subject other settlement account

Other settlement account

FTZ Policy Innovation----Financial Regulations

Individual Free Trade Account

(FTI)

Foreigner’s Free Trade Account

(FTF)

FT ACCOUNT FUND FLOW

Free Flow under Trade Settlement and Direct Investment

Cross Border Management

19


Cross-border RMB borrowing Inside the FTZ Outside the FTZ Before Now Before Now

Domestic Enterprises

Feasibility of foreign loan

X √ X X

Quota Actual paid in registered capital

Foreign-owned Enterprises

Feasibility of foreign loan

√ √ √ √

Quota

Gap between total investment and registered capital

Actual paid in registered capital Or Gap between total investment and registered capital



RMB capital flow

長三角-自貿區聯動模式

A is a manufacturing enterprise in Yangtze

River Delta, B is A’s main supplier in Yangtze

River Delta, and A want to borrowing a Loan

for payment of raw materials from B

Advantages： 1. To avoid the total assets ratio limit to domestic enterprises’ loan scale, achieve the group. 2. To break through problem about the domestic enterprises have no foreign debt quota. 3. To reduce the costs by more than 20%.

C

A

Outside the FTE

Inside the FTE

B

D

Mortgage

Hong Kong

A set up a C trading company in FTZ, and C make a Cross-border RMB borrowing from FTZ’s banks to pay B’s payment（or A’s Hong Kong affiliate D make a external credit really）


Cross-border RMB borrowing

21

FTZ Policy Innovation----Financial Regulations RMB Cash Pooling

上收：

Company I

Company II

Company III

Domestic

Company A

Company B

overseas Accumulating From Group Member

Cash Pool A

ccount I

Distributing to Group Member

Investment and operating income

investment demand and Operating expenses

①

①

①

② Cash Pool A

ccount II

FTZ

②

③

Centralized trading settlement and payment

Industrial Investment Current Items

Accumulating From Group Member


Accumulating From Group Member


Investment and operating income

investment demand and Operating expenses

Onshore Offshore

22


Foreign Currency Cash Pooling Benefits to Clients - Manage the foreign debt and lending quotas of all its members on a centralised basis - Enhance the efficiency of cross-border capital use - Reduce financial cost

Domestic foreign currency main account of firm in the FTZ

Current Account

Foreign debt

account

Capital, Assets Realisation & reinvestment

account

Net out-going transfer can not exceed 50% of owner’s equity of the group

New in-coming transfer can not exceed combined foreign debt limit of all members

International foreign currency main account of

firm in the FTZ

Settlement Account

(Overseas subsidiaries)

Other overseas

subsidiaries

Overseas cash pool

Cross border

Ⅰ Financial Services： ① Banking Services ② Health Insurance ③ Financial Leasing

Ⅱ Shipping Services： ① Ocean Transport ② International Ship Management

Ⅲ Business Services： ① Value-Added Telecommunication ② game machines and amusement appliance

Ⅳ Professional Services： ① Legal Services ② Credit Investigation ③ Travel Agencies ④ People Mediation ⑤ Investment Management ⑥ Engineering Design ⑦Construction Services

Ⅴ Cultural Services： ① Performance Agencies ② Entertainment Venue

Ⅵ Social Services： ① Education, training ② medical services

23

CSPFTZ Policy Innovation----Service Trade


● No minimum limit of registered capital is imposed on the single machine/single ship subsidiaries to be set up by the financial leasing companies within PFTZ.

● Financial leasing companies are permitted to engage in commercial factoring business as the sideline relates to their major business.

Financial Leasing

• Overall Plan of China (Shanghai) Pilot Free Trade Zone

• Interim Rules of Commercial Factoring Management in China (Shanghai) Pilot Free Trade Zone

Outside the FTZ Inside the FTZ

Commercial factoring

business as the sideline

No Yes

Preferential tax treatment No

Yes (An import VAT of 5% granted to the airplanes of a load-free

weight of 25 tons minimum that are purchased from overseas and leased to the domestic airlines)

Incorporated: Financial leasing companies 1014 companies SPV: 668 companies

25

Outside the FTZ Inside the FTZ

Approval authority Ministry of Commerce On the Provincial Level The FTZ Administration

Lead time 60 working days 5 working days

Requirements for Registration Capital

$10 million USD (Subscribed capital

contribution)

$10 million USD (Subscribed capital contribution)

（Single Machine/Ship Companies-RMB 100 thousand）

Comparison between inside and outside the zone

Establishment of Wholly Foreign Owned or Sino-foreign Joint

Venture of Financial Leasing Companies


26

長三角-自貿區聯動模式 A is a manufacturing enterprise in Yangtze

River Delta, B is A’s main supplier in Yangtze

River Delta, and A want to reduce the cost of

financing.

C

A

B

D

A implement its’ equipment “after-sale lease back” by C

financial leasing company which is inside the FTZ. C do

accounts receivable mortgage in D Bank which is also

inside the FTZ , then C get the offshore RMB credit, lower

A’s cost of funding indirectly.

Credit extension

Advantages： 1.To circumvent the domestic bank loans for manufacturing enterprise to strictly limit financial indicators 2.To revitalize the manufacturing enterprise production equipment finance function

FTZ Policy Innovation----Financial Regulations RMB capital flow

Mortgage

Outside the FTE

Inside the FTE

Opening Sector

Maximum Shares from Foreign Investment

Notes Outside the

FTZ Inside the

FTZ

Information Services 50％ 100％ For APP Store Business

Storage and forward services 50％ 100％ CDN services（Content Delivery Network）

Call Center services 50％ 100％ Call Center

Domestic multi-party communication services 50％ 100％

To achieve two or more points between real-time interactive or on-demand voice, image communication service via the communication network domestically

Internet access services 50％ 100％ To provide Internet access services such as the laying of fiber for the enterprises in FTZ

Online data processing and transaction processing services 50％ 100％ E.g. E-commerce

Domestic Internet virtual private network services 50％ 50％ VPN services（Virtual Private Network)

27

Value-Added Telecommunication


28

Value-Added Telecommunication Cases


Call Center services

Domestic multi-party communication services

● Foreign-invested businesses

are permitted to engage in manufacturing and sales of the games machines and amusement appliances.

• Circular of the Ministry of Culture on Implementing the Policies of Cultural Market Administration for China (Shanghai) Pilot Free Trade Zone

Outside the FTZ

Within the FTZ

The Foreign-invested enterprises engaged in

manufacturing and sales of games machines and

amusement appliances

No Yes


Manufacturing and sales of game machines and amusement appliance

30

[Case Company] Company Name: Microsoft gaming and entertainment equipment (Shanghai) Co., Ltd. Investors: MICROSOFT CORPORATION Registered capital: $33,400,000 Business scope: manufacturing and sales of in gaming and entertainment equipment... [business projects involving administrative approval shall operate by licenses]


Manufacturing and sales of game machines and amusement appliance

31

Main Points In bond first, declaration later

Self-transportation for goods within zones Manual verification with work order

Bonded demonstration and business

Maintenance service for overseas and domestic market

CSPFTZ Policy Innovation----Trade Supervision To support the development of China (Shanghai) Pilot Free Trade Zone, State Customs Bureau promulgated 14 reform policies for facilitating trading and exploring new trading functions within the zone.

32

Filling within 14 days on

arrival

After Customs approval, enterprise pick up goods and transport to the zone.

Pick up goods and transport to FTZ with shipping bill on arrival

Complete in-bond

declaration within 14 days after in-bond

CSPFTZ Policy Innovation----Trade Supervision

Now

Before

In bond first, declaration later

33

CSPFTZ Policy Innovation----Trade Supervision

Sun Land Shopping Mall

PFTZ Bonded Warehouse

Bonded Exhibition outside the zone

Filling in Bond

Sales System of Supervision

Bank

Bonded Exhibition Trade

34

Cross border E-commerce

Post duty

Bonded storage in

FTZ

Free of CIQ

Free of import license

RMB Payment

CSPFTZ Policy Innovation----Trade Supervision Cross Border E-commerce

Business Opportunities in Yangtze Delta

35

Yangtze Delta- Business Opportunities

Shortage of Expanding Property and Land Resources

Growth of the Rent

and Labor Cost

Adjustment of

Enterprise Operation Strategy

Solutions? 2013 2012 Increase

Average Personal Salary in Shanghai

RMB 5,036/month

RMB 4,692/month 7.3%↑

FTZ Average rent for workshop

RMB 1.3/㎡/day

RMB 1.2/㎡/day 10%↑

36

Many enterprises have started looking for future business expansion place in Yangtze River Delta as limited by the property and land resources shortage, rent and labor cost growth and enterprise strategy adjustment in FTZ.

Jaguar Land Rover FTZ Sales &

Operation Center

Jaguar Land Rover Jiangsu Vehicle and

Parts Factory


R&D Inside, Pilot Plant Outside

WuXi AppTec FTZ R&D

Center

WuXi AppTec Wuxi Pilot

Plant


39

Registration inside, operation outside

Glamour Sales FTZ

Company

Glamour Sales Minhang

Logistic Center

Glamour Sales Huangpu

Exhibition Center


40

危化品

Distance between cities in Yangtze Delta and Shanghai

Cities/district in Yangtze river delta

Distance to Shanghai

Qidong 105km

Jiashan 83km

Jinshan 68.5km

Nantong 128km

Fenghua 235km

Nantong

Fenghua

Jinshan

Jiashan

Qidong


41

危化品

Land Price and Property Renting Price

020406080

100120140160180200

land price

renting price(RMB/㎡/month)


42

危化品

Comparison to average salary for operator-level employee in Yangtze River Delta

0

500

1000

1500

2000

2500

3000

3500

4000

Qidong Nantong Fenghua Jiashan CSPFTZ Jinshan

Minimal salary

RMB/person/month


43

Advantages and disadvantages Advantages Disadvantages

Qidong City Jiangsu Province

1. Close to Shanghai 2. Lower operation cost

1. Lack of high level employees 2. Higher cost for logistics

Jiashan City Zhejiang Province

1. Close to Shanghai 2. Lower cost for logistics

1. Lack of high level employees 2. Lack of production properties

Jinshan District Shanghai City

1. Within Shanghai territory 2. Subway to Shanghai within 30 minutes 3. Easy to attract high level employee in

Shanghai

1. Higher cost for land and property 2. Higher labor cost

Nantong City Jiangsu Province

1. Close to Shanghai 2. Lower operation cost 3. Better port facility

1. Lack of high level employees 2. Higher cost for logistics

Fenghua City Zhejiang Province

1. Close to Shanghai 2. Chinese Taiwai Enterprises Gathering and

better industrial Foundation 3. Easy to attract high level employee

1. Higher cost for land and property 2. Higher labor cost


QIDONG

• Land space: 1208KM2

• Total population: 1.12million • Consists of 8 towns, 4 urban districts and 2 province-level economy

development zones

45

•Time of Establishment Early 2006 •Planning Area 30 square kilometers •Park Level Provincial Development Zone

•Industrial orientation Precision machinery Electronic and electrical machines Ship fittings Biological medicines


危化品

Registered capital: RMB 315.7 million Shareholder: Shanghai WaiGaoQiao 60%; QiDong 40% Business Scope: Responsible for the development and construction of industrial park with the land area of 5.33 square kilometers

46


47

Infrastructure Facilities The completed area of Phase I has reached the standard of “9 operational,1 flat”

Roads, electricity supply, water supply, gas supply, drainage and sewage, telecommunications, broadband, cable TV and the like are operational, and lands are flat.


48

Infrastructure Facilities

Worker’s Dormitory

Sihai Apartment

RMB100+/month/person

Available for 20k workers


49

Doctoral Entrepreneurship Park

NanTong University QiDong Branch


Infrastructure Facilities

50

Infrastructure Facilities In June 2014, Feiliks logistics and Qidong Binhai Industrial Park Administration signed the strategic cooperation agreement. Feiliks will provide high-level and comprehensive logistics services for companies in the park. What is more, the service charge will be average 10% lower than the market price with sponsor of toll fee from the administration.

Qidong Binhai Industrial Park

Shanghai

10% Lower logistics cost with subsidies by local government


Introduction of Our Company

51

About Us- Structure and functions

Shanghai Waigaoqiao FTZ United Development Co., Ltd.

Government Resources

Property Resources

Customer Resources

More than 6,000 customers

110 companies of Fortune 500 in FTZ

7 square kilometers of land

Authorized Outsourcing Service Provider by

CSPFTZ Administration

2 million square meters of office buildings,

Factories and warehouses

Operator of Outbound Investment and Services

Platform of CSPFTZ

CHINA (SHANGHAI) PILOT FREE TRADE ZONE ADMINISTRATION

Website：www.china-shftz.gov.cn

SHANGHAI WAIGAOQIAO FREE TRADE ZONE UNITED DEVELOPMENT CO., LTD.

Website：www. shftz.com

Shanghai UDC Business Consulting Co., Ltd.

Website ：www.udc-consulting.com

Outbound Investment Service Platform

Website ： www. shftz.cn

Online Enterprises Register Platform

Website ： oc-consulting.com

WeChat

UDCCONSULTING

外联发商务咨询 53

Our Contact Information

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