China Footprint: Shanghai FTZ attracts major multinational corporations

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Stocks, futures, buy, sell. These are the normal orders of the day in Lujiazui, a part of the Shanghai Free Trade Zone (FTZ) and the center of China's financial industry, as well as a new testing ground for attracting foreign investment.

FTZ: Symbol of China's opening

The Shanghai free trade zone has seven districts dedicated to different industry clusters. /Internet Photo

Established in 2013, the Shanghai FTZ has been the symbol of China's efforts in welcoming foreign investments.

Gone are the days when foreign firms come in for the low labor cost, low taxes and other preferential treatment. Even with today's wages rising and competition heating up, China has managed to keep its market attractive by opening up new sectors, simplifying regulations, and making the rules more transparent.

The country has specific measures in welcoming international players.

"We have a Lujiazui financial commission, where representatives of firms here can participate in the zone's administration”, said Liang Qing, director of the economic development department of the Shanghai free trade zone Lujiazui administrative bureau.

China currently hosts over 800 registered domestic and international financial institutions, the most in the world.

'Significant support' for newly established firms

For foreign financial firms, this is the land of opportunity, as China started to allow wholly-owned foreign asset management firms to set up in the zone since last year. US-based Vanguard, the world's largest mutual fund, entered in mid-2017 and is ambitious about tapping into a market with some 80 million high net worth investors.

"We believe in the foreseeable future, the wealth management market will continue to enjoy 15 to 20 percent growth ratio every year”, said Charles Lin, Vanguard’s country head of China.

Vanguard's offices are expected to be filled with local staff in a few months as China has evolved from the home of cheap labor to a vast pool of highly educated talents since China's reform and opening up efforts in 1978.

Throughout the entire process of setting up here, the company has been enjoyed support from the authority every step of the way.

"During our application of having a WFOE in Shanghai office, and also during identifying proper office space and also all the tax arrangements, we can see there's a significant support from the local government, especially the Shanghai Free Trade Zone”, said Lin.

'Continuous national treatment' for foreign companies

The positive business environment in the FTZ is felt across industries.

French sports company Decathlon has extensive investments in production lines in China. The firm’s many factories in China create substantial employment as 40 percent of their goods globally are made in China.

These bags belong to French sports company Decathlon. These products go straight from a factory to Decathlon's over 220 stores in 90 Chinese cities. /CGTN Photo

Fourteen years after it entered the country, the role of this market for the firm has evolved. China is now the company's major R&D, design, production and logistics center. The company moved its regional headquarter to the free trade zone in 2014.

"In China, we already have full industry chain to support our business here. So we have a lot of administration work and paper works in financial and legal parts. When we register in FTZ, we can feel the local procedure and registration is very transparent, open and simple”, said William Zhang, greater China president for Decathlon.

Liang said they are making continued efforts to support foreign firms: "The zone's previous reforms include things like broadening market entry through a negative list. But what's often overlooked is that we provide continuous national treatment to foreign companies in their daily operations”.

Decathlon is opening 2,000 stores in the next 20 years in the country. For many companies in the FTZ, China represents huge market potential. A positive business environment helps make their rapid expansion steps more solid.

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