The managing partner and a senior associate from London and Surrey full service law firm Mackrell Turner Garrett have attended a conference in Shanghai, China to discuss the impact and opportunities from the country’s first free trade zone (FTZ).
Nigel Rowley, the firm’s managing partner and head of litigation and Maung Aye, a senior associate in the firm’s corporate department travelled to China’s largest city on 21 January to attend the US-China Global Investment & Trade Alliance’s (USCGITA) conference.
The USCGITA is aimed at developing investment and commerce between the United States, China, Europe, South America, Africa and the Middle East together with promoting business partnerships among its members in these countries.
Michael Connolly, a partner at Morrison Cohen LLP, Mackrell International’s New York member, has been appointed as the USCGITA’s President for its New York Chapter and will seek to develop business opportunities between the United States and China.
Launched in September 2013, the Pilot FTZ covers an area of 29 square kilometres and was created in order to implement various economic reforms and to attract more foreign investment in China.
At the beginning of the year, China’s State Council announced that certain measures relating to foreign investment approvals and admissions within the FTZ would be relaxed. Prior to this, foreign investment in China had been heavily regulated with strict criteria limiting the types of businesses foreign investors could be involved in.
The measures that were relaxed included the processes for the establishment of wholly foreign owned enterprises (WFOEs), operating period and termination of WFOEs, capital contributions by foreign investors and early recovery of foreign investment. These now only need to go through a much simpler record filing procedure with the relevant authorities.
Nigel Rowley said the aim of the conference was to explore how the FTZ would benefit both Chinese and UK investors.
He said: “As an internationally focused firm this conference was an opportunity to see first hand how the radical free trade zone could benefit the firm and our clients.
Prior to the implementation of the free trade zone there were numerous legal hurdles that corporate clients had to jump through in order to invest in the country, while there were various ‘no go zones.’
This free trade zone opens up the door to significant investment in the city from foreign companies. If it is successful it is likely that the experimental zone will be replicated across the country.”
Recent figures from the FTZ show that a significant proportion of businesses who have registered there are Chinese, with foreign investment being limited to companies from other parts of the Far East followed by a small number from the rest of the world. In its first four months, the FTZ has already seen Deutsche Bank, HSBC and Citibank receiving approvals to operate there.
The Chinese market has been classed as one of the most difficult for investors to establish themselves in due to its restrictions on the sectors they can be involved in and the administrative and bureaucratic challenges which can frequently present themselves.
Mr Rowley added: “In a bid to compete with other markets in the Far East such as Hong Kong and Singapore which have traditionally been seen as much more investor friendly, China’s FTZ seems to be a step in the right direction. It is clear that the current model still needs to be refined a great deal, however the Chinese government wants to make it clear that investors should see the potential of the FTZ rather than focus on the existing limitations and restrictions.
Only time will tell whether the FTZ will encourage more foreign investment, however it is certainly refreshing and exciting to hear that proactive steps are being taken to make one of the world’s super-nations more accessible.”