China legislation breakthrough in Pudong New Area and Hainan Free Trade Port
China has attracted a lot of attention of the international community during the COVID-19 period, through the US-China trade conflicts, and the latest development of aerospace exploration. Nevertheless, on the legislation front, the granting of legislation rights to Pudong New Area and the issuance of Hainan Free Trade Law are of no less importance and significance for China and investors in China.
Shanghai gets special local legislation right to formulate Pudong New Area Regulations
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Decision on Authorizing Shanghai Municipal People’s Congress and Its Standing Committee to Formulate Regulations concerning the Pudong New Area (Decision). According to this Decision, Shanghai municipal people’s congress and its standing committee is authorized to, on the basis of complying with the constitutional provisions and basic rules of laws and administrative regulations, formulate Pudong New Area Regulations which may contain adaptation of laws, administrative regulations and departmental rules. The Pudong New Area Regulations will be applicable in Pudong New Area only.
The special local legislation right to formulate local regulations with adaptation of national laws and regulations was previously available to Autonomous Regions for Ethnic Minorities and Special Economic Zones such as Shenzhen, Shantou, Zhuhai, Xiamen and Hainan Province. In light of the Decision, by reference to the Special Economic Zones, Shanghai now has the legislation right to formulate local regulations with adaptation of national laws and regulations for Pudong New Area.
According to the 14th Five-year Plan (from 2021 to 2025) of Pudong New Area promulgated on November 30, 2020, Pudong New Area will further open up to foreign investment and aims to implement a further simplified negative list for foreign investment, and carry out pilot measures to further open up in the finance, telecommunications, medical, cultural and legal service sectors. A local legislation right with right to adopt adapted regulations and rules would no doubt facilitate and expedite the opening up. The institutional innovation and breakthrough of national laws and regulations in Pudong New Area may be achieved at the Shanghai level, and do not need to be submitted to the central legislative body for approval, though such Pudong New Area Regulations would need to be submitted to the Standing Committee of the National People’s Congress and the State Council for recordal according to the Decision.
With the legislation rights applicable to the Special Economic Zones, we believe that Pudong New Area will continue to be pioneer in China’s reform and opening up. We will continue to monitor the opening-up in Pudong New Area and update our clients.
China passes law to boost Hainan Free Trade Port
Further to the release of the Master Plan for Construction of Hainan Free Trade Port (Master Plan) on June 1, 2020, by the Central Committee of the Communist Party of China (CPC) and the State Counsel, the Standing Committee of the 13th National People’s Congress formally enacted the People’s Republic of China Hainan Free Trade Port Law (Hainan FTP Law) on recently June 10, 2021, laying out a solid legal foundation for the construction of the Hainan FTP at the national legislative level and ensuring Hainan’s opening-up and development based on the rule of law.
The Hainan FTP Law also provides the Hainan government with more legislative and reform autonomy, where the Hainan government is authorized to make local laws and regulations on trade, investment and related management activities for implementation in Hainan FTP.
The Hainan FTP Law emphasizes construction of the whole island into a free trade port, and establishment of policies and systems to achieve liberalization of trade, investment, the cross-border flow of funds, personnel exit and entry, and transportation, and secure flow of data.
Key messages from the Hainan FTP include:
- Goods (except those listed in the prohibitive or restrictive list) can be freely imported and exported between overseas countries and Hainan FTP, which will be under customs’ special supervision.
- Goods that fall outside the Import Management Catalog will not be subject to import tariff when entering Hainan FTP from overseas countries.
- Goods entering the mainland from Hainan FTP will be subject to import tariff. That said, goods produced by encouraged industrial enterprises that do not contain imported materials or contain the imported materials but reach a certain proportion of value-added processing in Hainan FTP will be exempted from import tariff.
- A minimum investment approval mechanism will be implemented and investment promotion policies will be improved to ensure a fair competition, open, transparent and predictable investment environment.
- Foreign investment will be entitled to national treatment subject to a negative list. A negative list will be formulated by the State Council and the Hainan government jointly and will be issued after getting approval from the State Council.
- Preferential tax treatment will be given to qualified companies and individuals registered in or residing in Hainan FTP.
- A more convenient visa policy will be implemented for talent and expatriates.
