Legislature to waive legal obstacles for foreign firms in FTZ

Companies backed by foreign capital operating in Shanghai's new free trade zone may be able to do more types of business than were previously open to them, such as auctioning cultural relics, if a proposal submitted to lawmakers on Monday is approved.

The State Council, the country's cabinet, has submitted a proposal to the National People's Congress Standing Committee, the nation's top legislature, that would halt the enforcement of four laws in China's first FTZ.

The Shanghai FTZ is being looked to by many as a prototype for zones that would lead to a rebound of China's economy.

The four laws being proposed for suspension are the Law on Foreign-capital Enterprises, the Law on Chinese-foreign Equity Joint Ventures, the Law on Chinese-foreign Contractual Joint Ventures and the Law on Cultural Relics Protection.

The suggested duration of the suspension is three years.

The move, according to the Xinhua News Agency, is intended to "solve the problems encountered when implementing related laws in the pilot area".

Minister of Commerce Gao Hucheng said some opening-up policies in the area contradict provisions in the four laws, so the government has suggested lawmakers permit the suspension of the laws in the FTZ.

The Shanghai FTZ, approved by the State Council in July, aims to give foreign-funded enterprises pre-establishment national treatment, apart from other incentives.

Gao said that giving national treatment to foreign companies in the FTZ requires suspension of the laws, which require more administrative approvals for foreign-funded enterprises than domestic ones to enter a market.

Allowing foreign-funded auction companies to sell cultural relics in the FTZ, which is otherwise prohibited in China, is one of the areas being considered.

The policies included in the proposal may be made permanent if they prove to be effective, Gao said.

The NPC review, scheduled to finish on Friday, is just the start of a legislative process that will remove legal obstacles to the FTZ's operations

Observers said it indicates the cabinet is about to establish new rules and regulations governing the project, assuming the proposal is approved after lawmakers vote later this week.