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China – Pilot Scheme Allows Foreign Investors To Own e-Commerce Firms In Shanghai Free Trade Zone.

19 January, 2015


China is allowing foreign investors to fully own e-commerce companies in the Shanghai Free Trade Zone (FTZ) as part of a pilot scheme.

According to a statement from the Ministry of Industry and Information Technology, reported by the state-run Xinhua News Agency, telecommunication authorities in Shanghai will “take charge of the pilot scheme and regulate and supervise foreign investors”.


Xinhua said: “The entry of foreign investors to the Shanghai FTZ is expected to trigger a gradual opening to overseas capital in China’s lucrative e-commerce business currently dominated by home-grown giants including Alibaba, JD.com and others.”


Technology law expert Peter Bullock of Pinsent Masons said: “When the Shanghai FTZ was launched in late 2013 it was touted as a game changer for foreign participation in a wide range of activities hitherto restricted for foreign entities. Unfortunately, there was considerable delay with advances being drip fed and often being announced in non-specific language, which failed to de-risk investment propositions for interested foreign entities, as is the case with the latest announcement.”


Bullock said: “Even if wholly-owned foreign entities may now invest in e-commerce businesses operating from the FTZ a number of other questions remain, including whether such entities will still need licences, for example Value Added Telecoms Licences or other more service specific permits, that are still restricted to domestic companies and whether the FTZ operators will have free rein to sell services across China, but outside the FTZ.”


Some 12,000 firms have been set up in the 29-square-kilometre FTZ since its launch, Xinhua reported last year.


The chairman of the Shanghai Commission of Commerce Shang Yuying told Shanghai Daily last August that the city had become an increasingly attractive location for foreign investment. The top-100 foreign companies “generate more than half of trade volume, sales and taxes by foreign companies here,” Shang said.


China’s State Council (cabinet) announced last September that the FTZ would be temporarily exempt from restrictions on foreign investment in businesses like shipping, automobiles, civil aviation and infrastructure development


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