FTZ's 'negative list' policy to be modified

Photo taken on Feb 24, 2013 shows the aerial view of the approach of the Nanpu Bridge in Shanghai, East China. [Photo/Xinhua]

The "negative list" policy being tried out in the China (Shanghai) Pilot Free Trade Zone won't be expanded nationwide immediately as expected, as modifications are needed, a senior official said on Friday.

Liu Dianxun, director of the investment promotion agency at the Ministry of Commerce, said at a forum that China launched the FTZ in Shanghai to carry out activities in particular fields such as the services trade.

Related policies will be disseminated gradually throughout the country, Liu said.

"The 'negative list' is just a pilot measure in the FTZ and won't go nationwide in the short term," said Liu.

Officially launched on Sept 29, the FTZ adopted a "negative list" approach, which specifies bans or restrictions on certain types of foreign investment.

The Shanghai municipal government released the list around the time of the launch, covering 1,069 businesses in 89 divisions within 18 main categories. There are also 190 regulations on the conduct of business in the FTZ. Any sectors not on the list are open to foreign investors.

"As the FTZ 'negative list' is quite similar to the existing Foreign Investment Industrial Guidance Catalogue, but with additional restrictions, there's been no surge in investments from foreign businesses in the FTZ," said Chen Bo, an expert on economics and trade at the Shanghai University of Finance and Economics.

Chen noted that the municipal authorities have suggested an "improved version" would come out next year.

As the local authorities said in early November, the current list of restrictions will be relaxed and shortened next year. The list will be revised annually.

"If the updated versions of the negative list expected to be released in 2014 and annually afterwards could attract more foreign investors in a short time, (the 'negative list' policy) probably would be ready to be expanded on a larger scale," said Chen.

In addition, experts also said that the FTZ in Shanghai is just the start of a reform process intended to facilitate the entry of foreign investors.

"Since the FTZ has only been operating for a quite short time, it's the beginning of the implementation of an innovative management method. It will take a longer time to see whether it works in attracting more foreign capital," said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation.

Huo added that the current major focus of the FTZ's negative list is the service sector. The policy should be expanded to different industries with detailed plans, before being applied in the whole country eventually.

Fitch Ratings Inc forecast in a report on Thursday that the government will maintain a controlling stance over "negative list" sectors that the State views as strategic and important to national security.

The ratings agency said that only very slow and conservative reforms are likely in the medium term.