Name Game in Shanghai Trade Zone; Supposed to Make Things Easier, a Reform Testing Ground Has Firms Lining Up for Days to Register

Name Game in Shanghai Trade Zone

Supposed to Make Things Easier, a Reform Testing Ground Has Firms Lining Up for Days to Register


Nov. 11, 2013 7:48 p.m. ET

SHANGHAI—On a recent morning, Kitty Zhang stood in high heels and a pink blazer poised to jump into China’s next big business opportunity. But first, she needed a company name—any name. The 21-year-old, hired to register a financial business, is part of a wave of tens of thousands of people over the past month or so seeking to stake a claim in the new Shanghai free-trade zone. Authorities inaugurated the “testing ground for new policies” in late September, identifying it as a reform hub for the 21st century.By the hundreds each morning, pioneers like central China native Ms. Zhang press into the zone’s administration office, located near a power station an hour’s drive from Shanghai’s skyline. They aim to register a new company, and many use same refrain to explain why: cha yi jiao—a foot in the door.

Economists portray the zone as a unique experiment of China’s economic future, with freedom to trade currencies, import tax-free and much more. How it might actually work remains murky, since authorities demarcated the zone with signage but posted few governing regulations.

For Ms. Zhang, the mismatch between high expectations and low regulatory transparency is playing out over a name. She is looking for one that contains three Chinese characters. Yet the registration office rejects the choices if any two of the characters appear in the name of another already-registered company in Shanghai.

China’s top leaders consider the zone hong li gai ge, a magnificent reform that may drive broad national trends, says Chang Chun (surname: Mr. Chang), a professor at the Shanghai Jiaotong University’s Advanced Institute of Finance. “It’s not Shanghai’s own,” he said.

But while the trade zone is one of the few tangible reforms unveiled by China’s new leadership, signals from leaders have been mixed. For one thing, there was disappointment when Premier Li Keqiang, who officials say was a strong proponent of establishing the zone, didn’t attend its opening ceremony in late September.

Thus, China watchers are keen to see whether the Communist Party will explicitly endorse the zone at the Third Plenum to conclude Tuesday in Beijing, which will establish economic priorities for the coming decade.

If the boldest ambitions take root, the zone would ultimately chart China’s economic future like Shenzhen did in the 1980s and 1990s. China let that southern city adjacent to Hong Kong spearhead policies now commonplace nationwide, like letting locals buy apartments and foreigners run factories.

Shenzhen early birds sometimes struck it rich, especially in real estate. So, hopefuls are descending on Shanghai’s zone, oftentimes posing for photos in front of sculptures that celebrate its creation. While applicants waited for their numbers to be called on a recent day, state economic planners representing two provinces toured the hall.

Shanghai Mayor Yang Xiong said questions about the zone dominated an annual brainstorming session late last month with chief executives of some of the world’s biggest companies, including General Motors Co. GM +0.05% , Coca-Cola Co. KO -0.45% and PriceWaterhouseCoopers. “We were originally here to talk about soft power but it turns out people are more interested in the free-trade zone,” the mayor told reporters afterwards.

For the confused, there are self-styled advisers circulating the zone and thrusting strategy sheets into hands of newcomers, putting the price of navigating the bureaucratic shoals at $420 for Chinese and $1,300 for foreigners, on top of the $300 government license fee.

Ms. Zhang was stuck at window No. 36, the first stop for registering a business. “This is my third day here,” she said, clutching a brown envelope of documents, including lists of names that had been the previous days

Shanghai’s government said in a statement the zone has made a “good start.” Daily Internet page views, for example, were running at 1.8 million for the zone’s registration rules, which note a “one-stop” registration center, limited bureaucratic interference and minimum capital requirements. The government said the licensing office dealt with 36,314 would-be applicants during the first month, including 3,172 people who got as far in the application process as checking a potential name they might use.

The Shanghai government says a number of factors make it easier to register in the zone, including that administrators don’t offer input on company names and instead approve all names as long as they meet the criteria.

Yet, only 208 companies actually got registered, its figures show.

Other than names, challenges include limitations for foreign investors in 190 business sectors. The “negative list,” from banks to Internet companies, covers around 18% of possible businesses in China, according to one government count. Mayor Yang says the list will shrink.

One newly formedzone business belongs to Zhou Yuanshou, who registered Shanghai Yuzhuo Trading Co., a combination of rarely used Chinese characters that means Glorious Outstanding Trading. Gripping the oversize certificate with a big red stamp, the steel and tea dealer from Fujian province said he already has a business nearby and isn’t sure how he will use the trading license. “I don’t see much difference in the free-trade zone,” he said. “It’s just there are more people here.”

“It’s a good thing to do international trade,” says a young woman in sneakers hovering near the license office’s Information Desk, where the primary official guidance is a sheet of paper taped onto it. Another woman interjects in halting English that her clients include Brazilian traders, backing up the claim with photographs of two passports stored in her mobile phone.

The registration office is thick with property owners and their agents, who point out that a business license requires an address within the zone’s nearly 11 square-mile perimeter. For an annual fee that several agents quote at around $3,380, the landlords offer “virtual” offices, tiny spaces inside partitioned warehouses that aren’t meant to be visited or worked in.

Some tote hundreds of cream-colored property ownership certificates, a reminder how real-estate prices are sizzling in the zone.

But window No. 36 remains a chokepoint.

“The name problem,” huffed a man in a blue suit. He slumped into a circular bench that already seated a garden-supply-company representative and a clothing maker, both at the name-check stage. Applicants are advised to bring many name alternatives that are then checked on computers.

Ms. Zhang points to a sheet scrawled with hundreds of sometimes nonsensical combinations of Chinese characters that she dreamed up watching TV, only to face rejection: Zan Bi Ya, the Chinese word for the nation Zambia; Xiang Ju Rui, which essentially means “Gathering the Auspicious Spirit;” and one that sounds similar to the name of retired Chinese politician, Zeng Qinghong. “The first day all failed,” she said. “The second day I got one approved. Today, I got three approved.”

She wasn’t done. Successful ones still needed final permission that would have to wait until later. And even if a name passes muster it may not be one that makes business sense. The names Ms. Zhang got preliminarily cleared meant as little in Chinese as they do in English, including Zhi Mu Sheng, roughly “Until Admire Instrument,” and Ji Pu Ben, which translates as “Season Ordinary Rush.”

On her fourth day, Ms. Zhang finally identified one workable name deemed acceptable for the free-trade zone: Jin Yan Feng, the characters for Gold Flame Mountaintop. More flabbergasted at her success than upset over the long wait she said, “It was longer than I expected but good enough.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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