CHINA (SHANGHAI) PILOT FREE TRADE ZONE -A Role Model for China?-

Transcription

1 CHINA (SHANGHAI) PILOT FREE TRADE ZONE -A Role Model for China?- RA Rainer Burkardt Austria Connect Greater China 2014 RA Rainer Burkardt Shanghai, October 24 th, 2014

2 Who we are WHO WE ARE We are and want to be different from other law firms (Rainer Burkardt, firm s founder) We are a law firm advising medium-sized enterprises as well as business groups and international industrial companies predominantly from Germany, Switzerland and Austria on their investments in the People s Republic of China. WHAT MAKES US DIFFERENT CHINESE LAW FIRM We are a foreign managed law firm licensed in the People s Republic of China specialized on Chinese law and admitted to advise foreign and Chinese companies on Chinese law; SCOPE OF SERVICES We advise on extrajudicial matters including, but not limited on the establishment and acquisition of companies as well as judicial matters including representing our clients during litigation in courts and arbitration throughout China. Due to his broad experience Mr. Burkardt has been appointed as arbitrator of the Shanghai International Arbitration Center (SHIAC); PRACTICAL APPROACH We do not only provide legal advice in a strict sense, but also take practical considerations, which are crucial to conduct successfully business in China, into account. This also includes government relationship management; IMPLEMENTATION We do not only provide excellent legal advice, but also support our clients during the practical implementation of our advice; INTEGRATED CONSULTING Our worldwide network of tax, HR and business consultants ensures that no cross-border or inter-disciplinary question remains unanswered; LOCAL KNOW-HOW Our team consists of English and German speaking lawyers registered in the People s Republic of China with up to 10 years of professional experience; CULTURAL UNDERSTANDING All our Chinese lawyers have studied aboard or worked in foreign companies and thus have the necessary cultural understanding for our foreign clients;

3 What makes us different WHAT MAKES US DIFFERENT CONSULTATIVE APPROACH Our lawyers come from business and government families or families with a university background, who naturally have a respective consultative approach and (self-) concept; COMMUNICATION & QUALITY Our team consists of German lawyers with up to 16 years professional experience in the People s Republic of China; this ensures a smooth and accurate communication with our clients and the highest quality standards; COST-BENEFIT RATIO Given the quality of our service, we are not, cannot and do not want to be the cheapest advisor on the market. We welcome your inquiries for proposals and we are looking forward to explain the benefits of our advice to you; COMPERATIVE LEGAL ADVISE Our lawyers do not only have a comprehensive knowledge of Chinese law, but are also familiar with the German, Austrian and Swiss legal system. We help our clients to understand the differences among the legal systems, which is especially appreciated by our client s in-house counsels; NEGOTIATION STRATEGIES AND APPROACH In addition to a good contract, the right negotiation strategy plays a decisive role. We adjust the European negotiators direct approach to the Chinese customs, in order not to jeopardize the success of the negotiations; TRANSLATION CAPABILITIES Both in contract drafting, but also in negotiations our lawyers do not only translate what is said, but what our clients actually meant or require. A good translation does not only require linguistic abilities, but also cultural and legal understanding. That is, where the Sino-German nature of our law-firm is again of advantage for our clients; MOTIVATION We are passionate about our work! Our priority lies in providing excellent advice to our clients, not our profit maximization; TRUST We are trusted! Mr. Burkardt is the trusted attorney of the Consulate General of Austria in Shanghai since 2009.

4 Who we advise WHO WE ADVISE Multinational and foreign companies investing, or considering investments in China (China Inbound); Chinese subsidiaries and business entities established by foreign investors with their operations in China (In China - For China); Chinese companies investing or conducting capital raising transactions such as IPOs, in Germany, Switzerland and Austria (China Outbound). WHAT WE CAN DO FOR YOU Investment analysis (legal/tax); Location evaluation and comparison (legal/tax); Foreign Direct Investments (FDI), including the establishment of joint ventures, wholly foreign owned subsidiaries, holding companies, regional headquarters and representative offices; Due Diligence, legal and financial analysis of Chinese target companies before transactions such as mergers and acquisitions; Mergers and acquisitions (asset deals/share deals); Legal opinions on Chinese law; Litigation in courts, in particular labor, civil and administrative courts and administrative processes in China; arbitration, including SHIAC and CIETAC and alternative methods of dispute resolution (ADR/mediation); Government Relationship Management; Distribution and trade law; Business law and corporate/individual income tax law; Chinese labor and social security law; Technology transfer and licensing;

5 What we can do for you WHAT WE CAN DO FOR YOU Insolvency law, in particular reorganization and liquidation of companies; Industrial specific know-how in the fields of automotive, manufacturing system engineering, plant engineering and construction, chemical and pharmaceutical industry, food and consumer goods industry; Legal translation of Chinese, English and German documents; Compliance and anti-corruption in China; Real estate and construction law; Integrated revision and business audit; Intellectual Property Rights (IPR) and strategies as well as enforcement in China, including trademark registration; Anti-trust law (anti-dumping); Environmental and energy law (compliance with environmental standards as WEEE and RoHS).

6 I. Framework Plan of the SPFTZ The China (Shanghai) Pilot Freetrade Zone ( SPFTZ ) Framework Plan is established based on the strategic decision by the Central Government is a significant measure to boost China's reform and opening up under the new circumstances provides detailed guidance on initiatives and their respective implementation measures shall form a supporting mechanism for building Shanghai as an international economic, finance, trade and transportation center

7 II. 3-years targets of the SPFTZ During the course of 3-years of piloting reforms, starting on October 1, 2013, the SPFTZ shall: expedite the functional transformation of government promote the reform of the foreign investment administrative system expand the opening up of service sectors explore RMB convertibility under capital account items and opening up of financial services explore to improve regulatory support systems experience hence gained shall serve nationwide with the new ideas and approaches for opening up of the economy and deepen the reform further

8 III. Functional Transformation of Government Expedite the functional transformation of government Shift administrative management procedures from prior MOFCOMapproval to registration and subsequent supervision with one-off acceptance and integrated examination and approval Establish online information platform to consolidate information amongst various [administrative] departments Establish a comprehensive assessment mechanism of industry information tracking, supervision and collection to strengthen the administration and supervision of activities outside of the SPFTZ conducted by entities registered in the SPFTZ Implement a joint supervision and enforcement system to cover the areas of quality and technical supervision, food and drug supervision, intellectual property, industry and commercial administration, and tax administration to enhance efficiency Establish an intellectual property related dispute resolution and assistance system

9 IV. Reform of the Foreign Investment Administrative System Promote the reform of the foreign investment administrative system Explore the Negative List (2013) administrative approach For the projects that are not stated in the Negative List, foreign investors and domestic investors will receive the same treatment, by going through filing procedures instead of approving requirements (with exceptions defined by the State Council) Shanghai Municipal People's Government will be in charge of the project filing procedures National security review system will be improved, and pilot national security review on foreign investment projects will be trialed in the SPFTZ to constitute a safe and efficient open economic system Since July 1, 2014 a new negative list Negative List (2014) is published and in force The Negative List (2014) has been reduced 51 articles from 190 articles to 139 articles (about ¼) This includes among others several industries in the fields of wholesale & retail, transport, warehouse and postal service and real estate

10 V. Opening up of Service Sectors Expand the opening up of service sectors Six service sectors including: Financial services Transportation services Commerce and trade services Professional services Cultural services Public services sectors are selected to be enlarged and opened and market access restrictions will be suspended or cancelled, in order to create an environment of equal market access for the benefit of all investors.

11 VI. Explore RMB Convertibility under Capital Account Accelerate innovation of financial services Under proper risk control, SPFTZ will pilot: RMB capital account convertibility Interest rate liberalization Cross-border use of RMB A foreign exchange ( FOREX ) administrative system that is in line with international practice to facilitate trade and investment Liberalize cross-border financing and administration on foreign debt Enhance Foreign exchange ( FOREX ) centralized operation by multinational companies' headquarters to encourage the setup of regional or global treasury centers Establish financial reforms in SPFTZ to support Shanghai's development into an international financial center

12 VII. Improve Regulatory Support Systems Improve regulatory support systems: Customs administration Optimize customs administration process by coordinating administration of frontier (i.e. goods flow between overseas and the zone) and second-tier (i.e. goods flow between the zone and other domestic areas) Strengthen - under the principle of protecting national security and fair competition in the market the collaboration between the relevant departments and the Shanghai Municipal People's Government to improve the capability to protect the economic and social security SPFTZ will collaborate with State Council to strictly implement the provisions in respect of anti-monopoly investigations SPFTZ will set up a port supervision institution with integrated functions, and explore the feasibility of applying an electronic monitoring system and setting up of effective risk management

13 VIII. Functional Transformation of Government Outside SPFTZ: 40 days, plus additional 35 days for manufacturing subsidiaries Inside SPFTZ: 4 days, provided Negative List does not apply AIC SPFTZ Administrative Committee Local NDRC (only required in certain cities, e.g. Suzhou) Bank Tax Bureau AIC Pre-Name Approval AIC Tax Environmental Protection Bureau Local MOFCOM QTS (only required in certain cities, e.g. Taicang) Finance, Statistics (not required in certain cities, e.g. Taicang) Local MOFCOM Investor On-line registration Neg. list - QTS Neg. list + Approval by admin committee of FTZ + QTS One stop application Coordinates (1 day) if not on neg. list Only record at MOFCOM AIC SAFE Chop Carving QTS Customs, eport Bank Chop Carving SAFE Entry-Exit Inspection and Quarantine Bureau (ECIQ) Customs, e-port etc. Finance / Statistics No Safe

14 IX. Reform of the Foreign Investment Administrative System Guidance Catalogue vs. Negative List Outside SPFTZ: 2011 Foreign Investment Industrial Guidance Cataloge Categorizes foreign direct investment ( FDI ) into encouraged, restricted and prohibited Inside SPFTZ: Negative List 2014 All listed FDI is either prohibited [or restricted] All non-listed FDI is permitted Includes 139 special regulatory measures Covers 14 main sectors Covers 18 main sectors

15 X. Opening up of Service Sectors Several services on the negative list in the SPFTZ start to open compared to mainland PRC Following a selection of the most interesting changes : Service Outside SPFTZ Inside SPFTZ Value added telecommunication Banking / Financial institutions Only as JV Hard to get a License (only to FIE are known to us) Among other requirements repoffice duty for banks (at least 2 years at WFOE) Complicated to obtain license Financial services: Many financial services are restricted or prohibited e.g. no loans with free negotiable interest rates Several fields for WFOE opened License more swift and easier to obtain Allegedly no rep-office obligation License shall be less complicated Foreign invested Financial Institutions shall be supported (no measures released yet) Financial services shall open up. e.g.: Platform for cross border e- commerce RMB settlement shall be allowed At some point interest rates for loans shall be freely negotiable

16 X. Opening up of Service Sectors Service Outside SPFTZ Inside SPFTZ Construction services Limitation for foreign companies on participation in Chinese invested construction project Limitations for companies located within the PRC shall be waived Engineering design Among other requirements a track record Requirement for track record shall be waived Education Authorities nearly never grant licenses Medical services Authorities seldom grant licenses for JVs and nearly never for WFOE Several fields (e.g. vocational training) shall be opened up and licenses shall be granted easier Sector shall be opened up and licenses under certain conditions given to WFOEs Credit Inquiry / Credit Companies may be foreign Only JVs are allowed WFOEs are allowed Human resources intermediary companies EJV minimum 25% maximum 51% foreign investment Minimum registered capital of RMB EJV up to 70% foreign investment WFOE with minimum registered capital of RMB

17 XI. Explore RMB Convertibility under Capital Account Transfer and receipt of payment: Outside the SPFTZ: Inside the SPFTZ (company has to be located inside the SPFTZ, the bank not necessarily): Open additional account for foreign exchange ( FOREX ) to RMB (and register at the State Administration of Foreign Exchange ( SAFE )) Open Free Trade Zone Account ( FTA ) as RMB or FOREX account at a Bank Funds may be transferred freely from the FTA to any off shore account For payment, prove to the bank that service and goods have been received / exported (by invoices, contracts etc.) Funds from the FTA may be transferred freely to bank accounts opened in the PRC from over see entities A company may transfer funds from the FTA to its own account in the PRC outside the SPFTZ for current commodities (office supplies etc., not for production, export etc.), loan repayments, investments and other qualified cross boarder transaction (not determined yet) Other transfers between FTAs and accounts outside the SPFTZ are regarded as crossborder transfers

18 XI. Explore RMB Convertibility under Capital Account Transfer and receipt of payment: Outside the SPFTZ: Formerly SAFE approval for any payment, now the bank may process the payment Restriction of SAFE still apply. SAFE may take prerogative to control every payment to a foreign country Generally for companies no FOREX to RMB if not for goods, services or otherwise necessary Inside the SPFTZ (company has to be located inside the SPFTZ, the bank not necessarily): No free FOREX to RMB yet (when conditions are ripe ). For now: exchange based on companies actual need is necessary

19 XII. Improve Regulatory Support Systems Two tire system: Import declaration Import with declared list of record progress (1h) Mainland China SPFTZ Off-Shore Bring goods into SPFTZ: Import manifests Before completing customs tax formalities Separation between goods for further transport and goods for import Inside SPFTZ relaxed import/export inspection planned

20 XIII. Comparison Outside SPFTZ FDI is governed by a set of laws and implementation regulations for the establishment of Foreign Invested Enterprises ( FIE ) Inside SPFTZ Temporary adjustment of administrative examination and approval requirements FIE include Wholly Foreign Owned Enterprises ( WFOE ), Sino-Foreign Equity Joint Venture Companies ( EJV ) and Sino-Foreign Cooperative Joint Venture Companies WFOE, EJV and CJV laws do (temporary) NOT apply FDI is governed by 2011 Foreign Investment Industrial Guidance Catalogie FDI governed by Negative list Establishment of Foreign Invested Enterprises ( FIE ) is subject to MOFCOM-approval MOFCOM-approval for FIE is suspended but simplified registration process applies FIE and domestic (Chinese) enterprises are treated equal ( national treatment for FDI )

21 Our Contact Rainer Burkardt Head of Practice / Executive Counsel BURKARDT & PARTNER Room 2507, 25/F, Bund Center 222 Yanan Road East Shanghai , PR China 中国上海延安东路 222 号外滩中心 2507 室 T +86 (21) F +86 (21) r.burkardt@bktlegal.com Note: This presentation is for your information only and does not contain any specific statements to individual cases. We therefore assume no liability for the content or the application on any individual case. Copyright Notice: All rights, including copyright, in these materials are owned by Burkardt & Partner ( B&P ) and may only be used for personal/non-commercial purposes. Reproduction is subject to prior permission from, and attribution to, B&P.