Yangshan central to Shanghai’s shipping ambitions

In April 2009, the State Council issued the Promoting Shanghai’s Accelerated Development of a Modern Service Sector and Advanced Manufacturing Sector to Establish an International Financial Centre and International Shipping Centre Opinions, which articulate the importance to Shanghai and to the national economy of Shanghai establishing an international finance centre and international shipping hub.

World number one

Guided by the Opinions, in May 2009, the Shanghai Municipal People’s Government issued the Thoroughly Implementing the Opinions of the State Council on Promoting Shanghai’s Accelerated Development of a Modern Service Sector and Advanced Manufacturing Sector to Establish an International Financial Centre and International Shipping Centre Opinions. This document sets out in greater detail the policy measures aimed at establishing Shanghai as an international shipping hub. The Ministry of Finance, the State Administration of Taxation and local government authorities in Shanghai, in response, have also issued specific complementary measures.

According to a review carried out at a working meeting on promoting the establishment of Shanghai as an international shipping centre, convened by the Shanghai municipal government, the various tasks involved in the establishment of the Shanghai international shipping hub were comprehensively advanced in 2010. Significant progress was achieved in respect of the development of a collection and distribution system for modern shipping, the development of a modern shipping service system, preparation for the establishment of a comprehensive trial international shipping development area, and the improvement of the complementary support policies for the development of modern shipping proposed by the State Council. In 2009, the container throughput of the port of Shanghai reached 25 million standard containers and its cargo throughput reached 590 million tonnes. In 2010, its container throughput rose to 29.05 million standard containers, making it the world’s largest container port for the first time. Its cargo throughput reached approximately 650 million tonnes, maintaining its world number one ranking for the fourth year in a row.

Yangshan Free Trade Port Area

The Yangshan Free Trade Port Area, which was jointly established by Shanghai municipality and Zhejiang province, is subject to special customs supervision and will play a central role in the establishment of the Shanghai international shipping hub. Yangshan Free Trade Port Area not only applies the various policies specific to free trade zones, export processing zones and bonded logistics zones, but also enjoys (or will soon enjoy) unique policy advantages and favourable regulation. The main examples of these are as follows:

• since 1 May 2009, Yangshan has offered tax breaks for taxpayers (including for company branches) registered in its free trade port area. Pursuant to regulations issued by the Ministry of Finance and the State Administration of Taxation, the income derived by taxpayers registered in the Yangshan Free Trade Port Area from international marine shipping (including both cargo and passenger transport), the transport of cargo (covering cargo transported by road and inland waterway, including inland sea and adjacent sea, and related multi-modal transport business), warehousing, loading, unloading and handling, as well as international shipping insurance, may be exempted from business tax;
• Yangshan will soon implement, on a trial basis, a port of departure tax refund policy. The procedures for the refund of duties and taxes levied on cargo that departs from other ports in the PRC and is trans-shipped through the Yangshan Free Trade Port Area will be able to be carried out at the time that the cargo leaves the point of departure; and
• fund settlement and favourable financial policies, including policies that permit companies to open offshore accounts, policies that exempt companies in the free trade zone from implementation of the processing trade bank guarantee bench sheet and contract reconciliation system, and policies that permit them to implement convenient monetary pricing systems.

Thanks to its geographical advantages, and jointly spurred by its favourable tax policies and overall investment environment, the Yangshan Free Trade Port Area attracted US$17.6 million in contracted foreign investment and RMB1.85 billion in registered capital of domestic companies in the first half of 2010. Large shipping companies that have established a presence in the port area include COSCO Shipping, Shenhua Zhonghai and Sinotrans, and numerous multinationals in industries such as the electronic information industry and automotive industry have established warehousing and logistics centres in the port area.

It has been reported that policies conducive to the establishment of Shanghai as an international shipping hub, with the Yangshan Free Trade Port Area as its core functional area, will continue in a planned and step-by-step manner in 2011.

Benefits to shipping companies

The policies promoting Shanghai as an international shipping hub have had a positive effect on companies investing in the shipping industry in Shanghai, and will have a gradually greater impact on shipping companies.

First, the port of Shanghai is set to further improve its physical facilities, enhancing the shipping collection and distribution system and continuing to develop a comprehensive transport network, thereby providing a good physical foundation for the operations of shipping companies.

Secondly, the port of Shanghai is set to further improve its complementary preferential policies, continuing to implement policies such as the pilot regional tax exemption policy, and implementing on a trial basis and expanding the scope of the port of departure tax refund policy. This should create a more favourable environment for shipping companies.

Lastly, the port of Shanghai will continue to improve the support of industries that are intimately connected with the development of a modern shipping industry, giving credit support, fostering and improving the insurance market and further leveraging the strengths of the region in logistics services. These will create a more beneficial environment for the development of the shipping industry.

Henry Lee is a senior partner, and Jessy Wang is a lawyer, at Dacheng Law Offices

Dacheng Law Offices LLP, Shanghai

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500 Pudong South Road

Shanghai, 200120

Tel: +86 21 3872 2401

Fax: +86 21 3872 2400

E-mail:

henry.lee@dachenglaw.com

jessy.wang@dachenglaw.com

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