China (Shanghai) Pilot FTZ thrives as preferred gateway for foreign investors

The China (Shanghai) Pilot Free Trade Zone has established itself into a fertile land for businesses to thrive as well as a preferred gateway for overseas investors seeking to venture into the Chinese market as it remains committed to pioneering proactive reforms and bold experiments to optimize the business environment through policy supports and improved services.

The FTZ, which will officially celebrate its 10th anniversary on September 29, has been playing an active role in promoting the stability of Shanghai’s foreign investment and trade over the past decade, according to the latest data released by the municipal government.

Over the course of nearly 10 years through the end of 2022, the paid-in value of foreign direct investment totaled US$58.6 billion in the FTZ, constituting some 30 percent of the city’s total during the same period. In terms of foreign trade activities, the total import and export volume posted by the Shanghai FTZ in 2022 accounted for about 30 percent of the combined volume registered by the country’s 21 pilot free trade zones, which are located in both coastal economic hubs like Guangdong and Zhejiang and inland regions such as Sichuan and Shaanxi.

“As the first pilot free trade zone ever established in China, the Shanghai FTZ has played an important role in deepening the country’s reforms and opening up with a number of initiatives including the implementation of a negative list for foreign investment, a trade regulatory system focused on trade facilitation, as well as government administration and legal guarantee systems adapted to an open-market economy,” said Zhang Lei, a professor at the Shanghai University of International Business and Economics.

First launched in the Shanghai FTZ in 2013, the “negative list,” namely “special administrative measures for the access of foreign investment in specific fields as stipulated by the state,” has been widely considered one of the most successful experiments and was later written into Article 4 of China’s Foreign Investment Law that took effect on January 1, 2020.

The continuous shortening of negative lists in pilot FTZs has given foreign investment much wider market access. Since the first pilot FTZ negative list for foreign investment was implemented 10 years ago, the number of items on the list has been cut from 190 to 27 in 2021 after seven rounds of modifications, with basically nothing banned in manufacturing industries.

BD, a global leading medical technology company which formally established its representative office in China in 1994, said its development path in the country had continuously evolved since it settled in the Waigaoqiao Bonded Zone in 2002, with the research and development achievements originating from China rapidly advancing globally.

Waigaoqiao is one of the four zones that formed the Shanghai FTZ in 2013, when it covered 28.78 square kilometers. The FTZ later expanded to 120.72 square kilometers in April 2015 and further added the Lingang Special Area in August 2019.

“With nearly three decades of operation in China, BD is pleased to observe the evolving excellence of the MedTech ecosystem in Shanghai,” said James Deng, senior vice president of BD Worldwide and general manager of China. “We are steadfast in our commitment to further intensify our research and development initiatives within Shanghai, bolster our investment efforts, and harness the innovative advantages presented by the Shanghai FTZ and related policies, and these strategic actions aim to facilitate our substantial advancement and growth in China.”

In recent years, due to regulatory reforms, the US-headquartered medical technology giant has successfully obtained domestic approvals for multiple innovative products, leveraging abundant and reliable overseas clinical data. Simultaneously, with a clearer and more efficient regulatory process, BD’s innovative products can swiftly enter the Chinese market after their global launch, meeting the clinical needs of Chinese patients and healthcare professionals.

Looking forward, BD, guided by the mission “In China, for China,” said it would further leverage the advantages of the Shanghai FTZ in aspects of the industry chain, including research and development, manufacturing, trade, logistics, and distribution, as well as professional services, to continue to actively introduce global innovative products, deepen cooperation with local enterprises, utilize the platform of the upcoming 6th China International Import Expo, and explore the establishment of a higher-level innovation ecosystem in the field of the healthcare industry.

The Lingang Special Area of the FTZ, in the meantime, has also consolidated its role as a driving engine for Shanghai’s economic development in a number of key indicators including foreign investment and trade activities.

Paid-in value of foreign direct investment in the special area, for instance, constituted 8.6 percent of the city’s total in 2022, compared with just 2.6 percent in 2020. Its total import and export volume has soared by 44 percent on average annually over the past four years and further accelerated to a year-on-year growth of 54.6 percent in the first six months of this year, government data showed.

“Being close to the world’s largest container terminal, as well as the Shanghai Pudong International Airport, has been critical to the commercial success of Lingang,” said Kelvin Li, managing director, East China, Cushman & Wakefield. “Besides, a plethora of special preferential policies have also played a major role in attracting enterprises to the area with related policies being associated with finance, technology, manpower, public welfare, etc.”

The international property consultancy found the changes in Lingang rather dramatic after over four years of development.

“When we provided property advisory services to the Lingang Special Area five years ago, the area was deemed to be rather remote from Shanghai’s downtown area, particularly the Dishui Lake commercial cluster,” Li said. “However, following the settlement of a number of significant businesses, such as Tesla and COMAC (the company behind the C919 domestically produced wide-body aircraft), as well as the establishment of science parks, more and more enterprises, such as those involved in electric vehicles, aircraft manufacturing, life sciences, semiconductor production and AI, now consider the LGSA as the place to be in terms of doing business.”

According to the property services firm, not only the establishment of leading companies in the area, but also the creation of national functional service centers in the LGSA, such as the Shanghai International Reinsurance Exchange Center and the Shanghai Oil & Gas Trading Center, would continue to further the attractiveness of the area to businesses in the future.

“With the understanding that Lingang is and will continue to be one of the most important commercial areas in Shanghai, Cushman & Wakefield is determined to make every effort to make the LGSA a success,” Li said.