A PRESS CONFERENCE ON POLICIES TO OPEN UP AND DEVELOP PUDONG
SEPTEMBER 10, 1990
Time (U.S.A.): Will the development of the Pudong New Area be similar to that of China’s other economic and technical development zones? The prospects for Pudong’s development are encouraging, but so far there aren’t enough preferential terms to attract foreign investment, and the infrastructure is still very poor. Also, Shanghai’s bureaucratism is as hard as the stones on the Great Wall. How will you change this situation? And how will you make the Pudong New Area more attractive for foreign investment?
ZRJ: This April, Premier Li Peng of the State Council made the announcement in Shanghai of Pudong’s development and opening up. This is a major strategic decision of the Party Central Committee and the State Council, and this decision is an important development in China’s continuing reforms. When I was visiting Hong Kong and Singapore this year, I said that we were drawing up specific laws and regulations based on this decision of the central government. After almost four months of hard work, these laws and regulations were completed in August. The Party Central Committee and the State Council pay a great deal of attention to Shanghai’s development of Pudong. General Secretary Jiang Zemin and Premier Li Peng have both personally inquired about this work. Today, leading members from the departments concerned of the State Council have come here to announce three regulations.1 These will add the authoritativeness and gravity of legislation and will certainly increase the confidence of foreign investors.
I should let you all know that in such a short period, we drew up nine regulations,2 translated them into English and Japanese, and are holding this formal press conference—this isn’t bureaucratism, it is high efficiency. We believe that with the support of the Party Central Committee and the State Council, these regulations will be very helpful in promoting Pudong’s development and in attracting foreign investors. The prospects for Pudong’s development are very bright. Of course we will continue to examine and refine these regulations.
However, I feel that a good investment environment doesn’t consist exclusively of some preferential policies like tax reductions or waivers. Rather, it is an all-round investment environment. As I have frequently said, Shanghai has a complete array of industries, it is strong in science and technology, and its management standards are quite high. These are Shanghai’s all-round strengths.
Of course improving infrastructure is a major task of ours, and we are at present engaged in large-scale building in this area. But I don’t think Shanghai’s existing infrastructure is all that poor. We already have the three economic and technical development zones of Minhang, Hongqiao, and Caohejing, where there are many successful foreign enterprises and still more of them can be accommodated. Infrastructure is also in place in certain parts of Pudong, and conditions exist now for starting project construction.
I might also mention that the preferential policies in the three existing economic and technical development zones are exactly the same as those in Pudong. Of course the bonded free trade area is in Pudong. This is a fairly important policy, but the three existing economic and technical development zones also have bonded warehouses. Foreign banks may establish branches in Shanghai, but these don’t necessarily have to be in Pudong—they may also be set up in Puxi. That’s why we not only welcome everyone to invest in Pudong, but we also welcome you to invest in the three existing economic and technical development zones.
As for the bureaucratism that you mentioned, I don’t deny it, and I hate it as much as you do. But I might say that bureaucratism is pandemic all over the world. In the past, it took well over a hundred chops to get a project approved in Shanghai. We’ve now established the Municipal Foreign Investment Commission, and its goal is to require only one chop for the review and approval of foreign-invested projects. Although it hasn’t yet entirely achieved this, the work at least has improved. Otherwise, why would 6 out of the 10 enterprises rated as “the best joint venture enterprises in China” be located in Shanghai? Doesn’t that show that Shanghai’s investment environment isn’t bad? When I recently visited the United States, I also experienced some of the situations you described. If you were to say that our bureaucratism is like stone, I think that in some respects your American bureaucratism is like stainless steel.
At a press conference held by the Shanghai municipal government, September 10, 1990. Front row: from the left, Chen Yuan, vice governor of the People’s Bank of China, and Huang Ju, vice mayor and deputy secretary of the Municipal Party Committee; from the right, Vice Minister of Finance Xiang Huaicheng, and municipal government adviser Wang Daohan. Back row: third from the left, Ye Longfei, vice chair of the Municipal Commission on Foreign Economic Relations and Trade and vice chair of the Municipal Foreign Investment Commission; fourth from the left, Shen Beizhang, chair of the Municipal Commission on Foreign Economic Relations and Trade.
Reuters (U.K.): Mayor Zhu, just now you said that the investment environment isn’t just tax reductions and waivers, that it also means a comprehensive investment environment. Does this include political stability and legal protections for the rights of foreign investors? Personally, I think these two have worsened since last year. Will this worsening affect Pudong’s opening up and development?
ZRJ: Of course the investment environment includes political stability. I feel that the political environment in Shanghai is stable, more stable than it was before last year’s political turmoil—many foreign friends who have visited Shanghai can attest to this. I hope that foreign investors and entrepreneurs will have confidence in Shanghai’s investment environment. It is stable here and investment risks are very low. This is a very good investment environment and we welcome you to Shanghai.
Financial Times (U.K.): Just now you said that foreign banks could establish branches in Pudong and enjoy tax exemptions. Then how do you calculate the taxes for the four foreign banks that are already established and operating? Is it based on the current 50% tax rate? Mayor Zhu, just now you also mentioned that the three economic and technical development zones in Puxi can also enjoy the same preferential tax rates as Pudong. In that case, can the four foreign bank branches enjoy the same preferential policies as in Pudong?
ZRJ: It was only last night that Chen Yuan3 brought me the documents on establishing foreign bank branches in Shanghai, so I can only discuss my understanding of these regulations. That is, if a foreign bank applies to the People’s Bank of China and is approved, it may establish a branch in Shanghai, either in Pudong or in Puxi. Its income tax rate will be lowered from 50% to 15%, the same as the preferential rate enjoyed by foreign banks in the Shenzhen Special Economic Zone. But if the four foreign banks that are already established in Shanghai wish to engage in the lines of business and enjoy the preferential tax rates stipulated in these regulations, then they must reapply—they will not automatically enjoy this preferential treatment. In other words, everything must be done according to the regulations and everyone will receive the same treatment.
The Independent (U.K.): Mayor Zhu, when you were visiting Hong Kong, you said the Bund would become a “Bank Street.” Now many Shanghai municipal government offices have to move out of the former bank buildings—are there any difficulties or problems? Also, outside of China, the development of Pudong is associated to a large degree with your name. Should you one day leave Shanghai, what will happen?
ZRJ: I do hope the Bund will turn into a “Bank Street.” As for what difficulties there might be in moving out, that depends on how much you’re willing to pay, because we have to set a price for land that is being leased, and the land price around the Bund is quite high.
I believe the development of Pudong isn’t associated with my name. It’s a strategic decision of the Party Central Committee and the State Council, and no matter who serves as leader in Shanghai, this decision must be implemented. As for myself, there are still three years left in my term.
Time (U.S.A.): At present, Shanghai’s development is backward or rather slow, all because Shanghai had to hand over too much to the Ministry of Finance. In the future, what portion of Pudong’s taxes will have to be turned over to the national treasury? Shanghai already has three economic and technical development zones, so why do you still want to establish the Pudong New Area? Does the establishment of this new zone show that you’re now making a new economic policy?
ZRJ: The reason why Shanghai has been able to get an early start on infrastructure construction in Pudong is that we received tremendous support from the central government. The central government has enacted fixed-sum fiscal contracting for Shanghai. After we hand over a fixed sum, our extra fiscal revenues can be used to develop the Pudong New Area and for other construction.
The three existing economic and technical development zones are basically already filled with projects, whereas Pudong is a precious piece of land that can be developed—it’s an ideal place for foreigners to invest. The central government is allowing the 350 square kilometers of Pudong to be a development zone—this is the largest development zone in China to date. The central government is permitting the creation of a bonded tax-free zone in Waigaoqiao, and this is also unprecedented in China. This shows that Shanghai has enough capacity and strengths to further carry out the policy of opening up. The policies being implemented in Pudong are basically a continuation of those in economic and technical development zones, but there are also the new elements I described just now.
1. The three regulations were the following three regulatory documents on the development and opening up of Pudong released by the State Council departments concerned on September 10, 1990: “Administration of Foreign-Invested Financial Institutions and Sino-Foreign Joint Equity Financial Institutions in Shanghai,” issued by the head office of the People’s Bank of China; “Regulations on Enterprise Income Tax Reductions and Waivers to Encourage Foreign Investment and Unified Industrial and Commercial Tax in the Pudong New Area of Shanghai,” issued by the Ministry of Finance; and “Rules for the Implementation of Shanghai Customs of the People’s Republic of China Concerning Goods, Means of Transport and Personal Effects Entering or Leaving the Waigaoqiao Bonded Zone of Shanghai,” issued by the General Administration of Customs.
2. In addition to the three regulations in note 1, the following six regulations were issued by the Shanghai Municipal Government: “Shanghai Regulations to Encourage Foreign Investment in the Pudong New Area,” “Administration of the Waigaoqiao Bonded Zone of Shanghai,” “Regulations on Land Management in the Pudong New Area of Shanghai,” “Provisional Regulations on the Planning, Construction, and Management of the Pudong New Area of Shanghai,” “Review and Approval Procedures for Foreign-Invested Enterprises in the Pudong New Area of Shanghai,” and “Guidance for Enterprises and Investments in the Pudong New Area of Shanghai.”
3. Chen Yuan was then vice governor of the People’s Bank of China.