Shanghai Free Trade Zone : Telecommunication & Shipping

One of the main objectives of the Shanghai Pilot Free Trade Zone (FTZ) is the further opening up of the service sector to foreign investors. Let us look at two specific examples that could be of interest for foreign investors : telecommunication and shipping.

The telecommunication industry has traditionally been very strictly regulated in China. Due to these restrictions and very hard to obtain licenses system, there were almost no foreign investors who obtained the permission to provide telecommunication service

Within the FTZ, overseas investors can now own more than 50% of online storage businesses and internet access services. This ownership is limited to 55% max when it comes to online data and transaction-processing businesses. There is also a limitation for domestic internet virtual private network businesses, maxed at 50% for foreign ownership.

Another significant improvement is that telecom business enterprises that register and base their service facilities in the FTZ will be allowed to offer their services countrywide, excluding internet access.

Of course, this is an open call for foreign investors, but whether this will turn in the granting of licenses remains to be seen.

The very geographical location of the Shanghai FTZ confirms that one of the main purposes of it is to boost the growth of the country's shipping industry. One of the new features of it is the loosening of the restrictions on the foreign equity proportion permitted in joint ventures in this sector. From now on, foreign investors can hold a controlling percentage of equity in international shipping joint-ventures.

The other significant improvement is that the WFOE registered in the FTZ are now allowed to handle international vessel management. Under the previous regulations, only Sino-foreign equity joint ventures or cooperative joint ventures were allowed to do so.

As for telecommunication, this is clearly a call for foreign investors, but whether this will turn in the multiplication of WFOE in this sector is not sure yet.