18 Aug 2015
Shanghai FTZ Financial Leasing Pilot Reform to Extend Nationwide
The Ministry of Commerce (MOFCOM) recently issued a circular on promoting nationwide the experience gained in the Shanghai Free Trade Zone (FTZ) from the pilot reform of the financial leasing industry, including allowing financial leasing companies to engage in sideline commercial factoring business relevant to their main business and lifting the minimum registered capital requirement for subsidiaries set up by financial leasing companies.
The policy of offering preferential treatment to financial leasing in the Shanghai FTZ has effectively promoted the rapid development of this industry in the FTZ. However, it objectively creates "policy gaps" and allows good and bad leasing companies to compete as equal in the market. There are some "shell companies" that are not doing any business at all.
Currently the preferential policies offered to financial leasing companies in the Shanghai FTZ cover income tax, export VAT rebates and “out-of-zone treatment” for equipment exports.
MOFCOM Calls for Nationwide Promotion of Pilot Experience
According to the above-mentioned circular, MOFCOM will make overall deployments in three respects, namely, planning and guidance, improvement of public services, and strengthening of industry regulation. The departments in charge of commerce at all levels must do well in the planning, guidance and policy coordination of the financial leasing industry within their administrative jurisdiction, strive to create an environment favourable to its development, and promote the rapid and healthy development of this industry within their administration.
At the same time, the circular also called on the departments in charge of commerce at all levels to strictly require financial leasing companies to comply with the Measures for the Supervision and Management of Financial Leasing Companies and take leasing, including financial leasing, as their main business. The commercial factoring business they do on the side must be relevant to their main business. Their sideline commercial factoring business shall be governed with reference to the provisions for the management of the commercial factoring business.
According to the Circular on Promoting the Replicable Experience of the Pilot Reform in the China (Shanghai) Pilot FTZ issued by the State Council early this year, the replicable experience of the pilot reform in the Shanghai FTZ will be promoted nationwide. For the service industry, this includes allowing financial leasing companies to do on the side commercial factoring business relevant to their main business, allowing the establishment of foreign-invested credit investigation companies and joint-stock foreign investment companies, lifting the minimum registered capital requirement for subsidiaries set up by financial leasing companies, and allowing domestic and foreign enterprises to engage in the production and sale of amusement game equipment.
As far as the innovation of customs supervision is concerned, measures to be promoted nationwide include customs supervision for bonded futures delivery, repair of domestic and overseas goods (which subsequently need to be transported back outside the territory of China or the zone), and financial leasing.
For further details in Chinese, see Circular on Promoting the Replicable Experience of the Pilot Reform in the China (Shanghai) Pilot FTZ.