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Shanghai Free Trade Zone: Foreigners to ‘fully own’ e-commerce firms
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China has said that foreign investors will be allowed to “fully own e-commerce companies” in its Shanghai Free Trade Zone (FTZ).

The move is part of a pilot scheme, state-owned news agency Xinhua said.

The FTZ was set up in September 2013 and has acted as a testing ground for economic reforms by China’s government as it seeks to boost growth and productivity.

It is widely seen as a crucial part of the country’s market-oriented reforms.

Analysts said the move to allow foreigners to fully own e-commerce companies in the Shanghai FTZ was significant.

“Foreign e-commerce firms were previously required to have a local joint venture partner for their e-commerce business,” said Rajiv Biswas, Asia-Pacific chief economist at IHS.

“So this move represents a significant economic reform, liberalising foreign investment into e-commerce businesses in the Shanghai FTZ.”

Mr Biswas said the changes created a more level playing field as Chinese firms sought greater access to big e-commerce markets outside of China, particularly in the US and in Europe.

“The liberalisation of Chinese regulations for foreign investment into e-commerce in China needs to be seen against the wider context of the rapid expansion of Chinese e-commerce firms,” Mr Biswas said.

“Notably the Alibaba Group, following its very successful IPO in 2014.”

But he said the reforms still represented “a significant opportunity” for foreign e-commerce firms due to the large size of the Chinese consumer market.

FTZ expansion

Last month, state-owned news agency Xinhua reported that China was set to expand its Shanghai FTZ to include “the city’s commercial and financial centre Lujiazui, as well as Jinqiao and Zhangjiang districts”.

The government said the expansion would help China “explore new paths and accumulate experience for the country’s further and overall reform”.

China also announced in December that three new trade zones would be set up in Guangdong, Fujian provinces and Tianjin municipality.

It said the new zones would offer “eased investment rules to speed up reforms amid economic hardship”.

Xinhua said since the launch of the Shanghai FTZ in 2013, some 27 economic reform measures had been applied in other parts of China.

China’s exports beat expectations with 9.7% rise

China’s December trade figures have beaten expectations with exports up 9.7% and imports down 2.3% from a year earlier.

The final numbers for the year mean exports rose 6.1% in 2014 compared with 2013, while imports rose 0.4%, state news agency Xinhua said.

The December figures leave the country with a surplus of 304.5bn yuan ($49.1bn; £32.34bn) for the month.

Analysts expected imports to fall more than 7% and exports to rise by 6.8%.

They said a continued fall in imports reflected the impact of the continuing plunge in world oil prices.

In November, China’s imports fell 6.7% against predictions of a 3.9% rise.

“[Falling imports also] reflect declines in other key commodity prices such as iron ore and coal on Chinese import figures in recent months,” said IHS Asia-Pacific chief economist Rajiv Biswas.

Good news?

There has been speculation that the Chinese government would soon introduce fresh stimulus measures to boost economic growth, but analysts said the better-than-expected data would give the government some reprieve.

“Net exports are providing a positive contribution to Chinese [economic] growth at a time when domestic demand has been moderating, particularly due to the slowdown in the residential construction sector,” Mr Biswas said.

China’s economic growth slowed to 7.3% in the third quarter, marking its weakest quarter since the global financial crisis as a cooling property market and tighter credit conditions weighed on growth.

Mr Biswas said he expected Chinese merchandise exports would grow at 7.7% this year, “helped by stronger growth in the US economy and some improvement in EU growth, as falling oil prices provide a positive stimulus to the US and EU economies”.

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