Rules for Shanghai FTZ expected next quarter

SHANGHAI -- The Shanghai Municipal People's Congress, the city's legislature, has begun research on regulations for China's first pilot free trade zone, which are expected to become effective in the first quarter of 2014, the Shanghai Securities News reported on Monday.

The Chinese government officially inaugurated the 29-square-km Shanghai FTZ on September 29.

For now, the special zone is governed under a legal framework of a general administrative regulation and five documents, all released by the Shanghai municipal government on September 30.

The current regulation, officially called the Administrative Measures for the Shanghai Free Trade Zone, clarifies the administrative system and regulations, aiming to regulate the daily operation of the zone. The five documents include registration rules for the establishment of foreign firms and foreign-funded projects, and management rules for investment and entry by foreign investors (the so-called "negative list" approach).

The report quoted Li Zhaojie, deputy director of the FTZ's administrative committee, as saying on Saturday that the Shanghai Municipal People's Congress would unveil the Shanghai FTZ law in the first quarter of 2014.

"Our goal is to upgrade (the legal framework) from the administrative measures to regional-level laws. Through legislation, we aim to provide legal protection for the free trade zone," Li said.

The newspaper also quoted an unnamed source involved in the legislation process as saying that the content of the incoming FTZ regulations is expected to be based on the general administrative regulation and five documents.

The legislation process is expected to take into account problems which had emerged after the inauguration of the FTZ, said the source.

According to the report, various departments of the Shanghai city government are likely to introduce more administrative measures for the zone, such as measures on the establishment of solely foreign-funded medical institutions.

China's top legislature has authorized the State Council, or the Cabinet, to modify laws related to foreign enterprises in the zone.

As authorized by the National People's Congress Standing Committee, the State Council will suspend administrative approvals on foreign-funded enterprises, Chinese-foreign equity joint ventures and contractual joint ventures in the Shanghai free trade zone.