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Each Area of Sichuan Pilot Free Trade Zone Benchmarks Against the World's Top Evaluation System for Better Business Environment

On May 16th, Chengdu Tianfu New Area of China (Sichuan) Pilot Free Trade Zone stands against the blue sky and white clouds.

Benchmarking against high evaluation standard

How do the three major areas play this

● South Sichuan Port Area: Launching a three-year operation plan to optimize the business environment; exploring reform of the “hour-list system”; some indicators of its commercial system have reached or outnumbered that of Hong Kong.

●Chengdu Qingbaijiang Railway Port Area: Exploring the special pilot reform to optimize the business environment; exploring the "one bill-of-lading" reform for multi-modal transportation, etc.

● Chengdu Tianfu New Area: Exploring to implement the special pilot reform to optimize the business environment; exploring a rapid review mechanism for cases related to intellectual property, etc.

Two Years of Sichuan Pilot Free Trade Zone

Achievements

[The pilot missions have been fully carried out]

● Over 95% of the 159 pilot reforms and tasks assigned by the central government have been implemented

● More than 400 practical cases have been formed

 [Continued improvement of business environment]

● Two batches of 142 provincial-level management authorities have been delegated to areas of the Pilot Free Trade Zone

● "The hour-list system" has reduced the time for starting businesses to 2 working days, and sometimes to as fast as one hour

● Shuangliu Airport has adopted the clearance system for “7×24 hours” with appointment, and the customs clearance efficiency of Chengdu ranks among the leading ones of the 42 districts in China.

[Reform dividends continue to be released]

As of the end of 2018

● 53,000 enterprises have been newly established in the Pilot Free Trade Zone with a registered capital of 759.9 billion yuan

● A total of 628 foreign-invested enterprises have been introduced, with 85% of them from the high-end service industry

●More than 200 major projects have been signed worthy of around 400 billion yuan

Get a snapshot of the achievements in the frontline

From May 7th to 10th, the report team of "The Magnificent 70 Years of Struggle for A New Area - Field Investigation of Reporters to National Pilot Areas" set foot on the Sichuan Pilot Free Trade Zone.

Their first stop is the Comprehensive Service Hall of South Sichuan Port Area in Luzhou City. Upon entering the door, the reporter saw a huge screen that displayed the used time and time limit for the handling of administrative examination and approval related items - this is the "hour-list system" which marked local exploration. “An important reason for exploring this system is that we are improving the business environment with reference to the World Bank Business Environmental Assessment System.” The on-site staff introduced.

The World Bank's business environment evaluation system, a fancy yet unfamiliar term, was brought up many times in their subsequent talks with others. The responsible persons of the three areas of the Sichuan Pilot Free Trade Zone have told reporters that this evaluation system represented the standard in their exploration of a realistic path to improve the business environment.

Why did they adopt the same standard without consultation beforehand? What does this innovative exploration mean? What has it brought forth?

How did it start?

Knowing the gap in the processing time for examination and approval items, each area has decided to take business environment improvement as the focus, and to voluntarily benchmark against the indicators of the World Bank's business environmental assessment system

Zhong Wen had the idea of benchmarking during his visit in Hong Kong.

Dating back to 2017 when the Sichuan Pilot Free Trade Zone has just been established, the head of the Planning and Research Center and Management Committee of the South Sichuan Port Area went to the Hong Kong Buildings Department for the first time. "It’s so different!" Zhong Wen said that the time needed for the local approval of construction projects can be pin down to a specific working day. If there is a delay, Hong Kong civil servants will have to catch up with the scheduled time even if it meant they must give up holidays.

Almost at the same time, Chen Li, head of the Policy Research Office of Chengdu Free Trade Office, also saw the latest World Bank business environment report on the Internet. China ranks in the middle of the list. “This report used Shanghai and Beijing as sample cities, and the business environment in the western regions like Sichuan will rank even behind.”

After noticing the gap, the areas of Sichuan Pilot Free Trade Zone has successively established the business environment improvement as a key task: the three-year operation plan of optimizing the business environment in the South Sichuan Port Area; the Chengdu Tianfu New Area and Qingbaijiang Railway Port Area of the Sichuan Pilot Free Trade Zone are also exploring the implementation of a special pilot reform to optimize the business environment. In this process, the World Bank's business environment evaluation system indicators have always been held up as the guiding principle of each district; and the top ranked places like Singapore and Hong Kong have turned out to be the target of every area.

Why does the Pilot Free Trade Zone pay so much attention to the improvement of the business environment? Deng Fuhua, Assistant Dean of the Comprehensive Research Institute of China (Sichuan) Pilot Free Trade Zone of Southwestern Finance University, talked about his view: The important task of the Pilot Free Trade Zone is to improve the open economic system. Creating a stable, fair, transparent and predictable business environment represents the institutional innovation just needed for Sichuan's further expansion.

What path did they follow?

Benchmarking against the World Bank’s high standards represents a process of “localization” through “international path”

On May 9th, the report team arrived at Chengdu Qingbaijiang Railway Port Area. A billboard on the roadside caught the attention of the reporter. A train passed by with its top body painted with several characters - "Here links the world."

The business environment needs to “face the world” like a train with a clear direction and a fixed path. The World Bank has provided 10 clear first-level indicators for the above-mentioned system, including starting a business, handling construction permits, obtaining electricity, registering property rights, obtaining credit, protecting minority investors, paying taxes, cross-border trade, contract execution, and declaring bankruptcy; they can also be subdivided into more than 40 secondary indicators, each of which has high international standards for reference – for example, it takes only half a day to start a business, and it takes an average of 120 days to resolve a commercial dispute.

Can these standards be applied directly to Sichuan? Almost all respondents answered “no”. Chen Li mentioned that the legal framework, institutional mechanisms and realities at home and abroad are completely different, thus direct application does not work at all.

Chen Ran, Deputy Manager of the Multimodal Transportation Department of Chengdu International Land Port Operation Co., Ltd., shared an interesting point: the high standard of the World Bank represents a process of “localization” through “international path”.

Like the "one bill-of-lading" reform of multi-modal transportation he had took part in, its intention was to make cross-border land transportation as convenient as the world-wide shipping services that have been around for hundreds of years. However, the land trade rules are not as complete as maritime trade. Not to mention the cumbersome procedures, moreover the railway transport documents have no property rights and cannot be pledged. "How could a piece of document be used as real goods to apply for a mortgage? What if the goods are stolen on the road? What if damaged?" Most banks held reservations.

After receiving the cold shoulders from banks, Chen Ran and his colleagues decided to separate the financial part, and launch “door-to-door” service instead with simplified formalities, and gradually upgrade the cargo monitoring, etc., to accumulate conditions for future pledge and financing with document. “When we have a customer base, and when our monitoring conditions are mature, the banks will naturally recognize us.”

This reform referred to as “the first step in exploring the rules of land trade” by domestic media has ushered in its favorable turn this year: when the multimodal transportation “one bill-of-lading system” concluded more than 1,000 orders, banks reached us for cooperation. Chen Ran said that in the first four months of this year, pledge financing has been secured for 13 orders, which is many times more than that of the last year.

What is the signal?

In less than two years of benchmarking, Sichuan has found its tight path, and relevant explorations have sent a positive signal.

What are the gains from referring to the World Bank Business Environmental Assessment System?

The most direct expression can be seen on the summary materials provided by the Provincial Office of Free Trade. The material lists typical items from more than 400 practical cases in the Sichuan Pilot Free Trade Zone over the past two years since establishment, of which more than 80% are closely related to the improvement of the business environment. “Promoting trade facilitation embodies the two-year practice of the Sichuan Pilot Free Trade Zone.” Deng Fuhua said that the relevant system of the World Bank has guided Sichuan in finding its own right direction.

As for the changes brought about by these explorations, many interviewees said that although it has yet to reach two years since the benchmarking initiative, still the positive signals at present are gratifying already. “Referring to the World Bank's business environment evaluation system, we chose the fourth-ranked Hong Kong as our matching target.” Feng Jian, Deputy Director of the Administrative Examination and Approval Bureau of the South Sichuan Port Area Management Committee, said that some of the indicators of the commercial system in South Sichuan Port Area have reached or exceeded the level of Hong Kong by means of the “hour-list system” and other reforms. “Like business registration, it takes 5 working days in Hong Kong, and we could handle it in 18 hours.”

Companies have benefited the most in this regard. In the Chengdu Qingbaijiang Railway Port Area, Liu Xia, Manager of the Business Department of Sichuan Port and Air Supply Chain Management Corporation, told reporters that the custom clearance for parallel-import vehicles is faster than the coastal ports. “It takes a week for a coast port to get the car, and it only takes up to 3 days via this land port”; In the Chengdu Tianfu New Area, Jiang Tao, Head of Chengdu Blue Wind Group Holdings, said that thanks to the proposed rapid review mechanism of local intellectual property-related cases, nowadays law suits for counterfeit products encountered in the wholesale market can be filed directly and handled within 3 months. This is something he dare not think about in the past...

Many people have mentioned the same data to demonstrate the improvement of the business environment: In the past two years, the Sichuan Pilot Free Trade Zone has attracted many foreign-invested companies which account for nearly 1/2 of the provincial total with less than 1/4000 of the provincial total area.

On May 10th, the report team arrived at their last stop of the China-European Center. In the newly-funded Free Trade Zone Administrative Service Hall, a British businessman Mike who came here for consultation said: "every window is equipped with a translating device, so I think the environment and services here are at least international-oriented."


 
 
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