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Another piece written for the Art Newspaper

Shanghai opens USD $100 million tax free art trade center, plans to become “Panama of cultural trade”

A Shanghai government backed company has established a special center for tax free trade in artworks in the Waigaoqiao special trade zone. Waigaoqiao is a large bonded area, home to more than 150 large corporations, who use the area to manufacture industrial products, predominantly for export. Ren Yibiao, Chairman of OICT, the company in charge of the new center, and also CFO and vice President of Jinwin Investment, a large Shanghai government backed investment group, in an exclusive interview with Art Newspaper explained that the Shanghai government has created a series of new regulations relating to tax refunds and tax free incentives especially for the new art trade center. Its formal English language name is the “Shanghai Oriental International Cultural Service and Trade Platform” (OICT).
Based in a brand new 34 floor building that cost almost USD$ 100 million to construct, completed in September, (the entire building is dedicated to OICT) Ren said: “this is to be a platform for cultural trade, I want this to be the Panama of cultural and copyright trade in China. My goal is that this will be a center where all cultural companies will register here.” The new regulations that have been created for OICT allow firms registered with his company to two years tax free sales of artworks and related cultural products into China, and 50% reduction thereafter, with numerous additional tax benefits, including a 100% refund of personal tax for managers for three years, and a 50% reduction thereafter.
OICT also offers subsidized rents for tenants conducting cultural trade related business in the purpose built building, of RMB 1.8 (USD$ 0.26) per meter per day. Ren also pointed out he has also fitted out a 3000m2 space, to European standards, for auction houses and galleries that want to showcase their work to Chinese collectors in the bonded area. “We are within the bonded area of Waigaoqiao, that means within this area, you are in the border of China yet outside the jurisdiction of China customs” Ren said. Another two floors are dedicated to common use show rooms, meeting rooms and conference facilities. “Altogether about 10,000 m2,” Ren said.
Asked whether this is a direct challenge to the tax free status of Hong Kong, or Singapore Freeport, Ren said:” This is a very sensitive question. Hong Kong has a long history in this field, we cannot compete with them, we have just started. We want to develop a Chinese cultural zone, this includes Taiwan, Hong Kong, even Singapore, to work together to create, to develop a market, it will work if we join together. We visited Hong Kong and Macau, and plan visits to Taiwan and Singapore to discuss this. Shanghai is a big port, and before the revolution it was also a cultural port, you needed to be successful in Shanghai before you were successful in China. There are numerous opportunities in the cultural trade in Shanghai, we wish to develop the business of big, well known names of the culture business, here.”
Ren explained that to date the OICT center has secured RMB 700 million (USD$ 102 million) investment, RMB 200 million (USD$ 29 million) in bank loans, the remainder 80% from Jinwin Group and 20% from Waigaoqiao Group. “I hope that we should become profitable in three to five years,” Ren said.
Jinwin Group has diverse interests in Shanghai, and has control of numerous business’ – such as Shanghai’s exclusive State Council approved license for importing of foreign publications, and a controlling share in the listed Shanghai Oriental Pearl Tower, the city’s iconic landmark. “Jinwin has capital of RMB several billion (several hundred million US dollars) to promote cultural trade,” Ren said.
Commenting on the current economic crisis Ren, who has a long background in China’s film industry, said: “Well, for the culture industry, there are still many opportunities in Shanghai. For instance Hollywood grew up during the economic crisis of the 1930s, the cartoon industries of Korea and Japan during the 1970s crisis. Currently, all Chinese industry is affected, and we are paying attention to this, I feel in China we haven’t reached the bottom point yet, but the affect will not be as strong as in the US, and within a year the situation will be improved, to say just right, for us.”
Ren is also looking for partners for forums and discussions for artists and business people on topics such as meeting the requirements of collectors, and combining experiences and views on collectors from various points of the globe, such as China and Europe. “To meet the traditional habits and spending habits of Chinese collectors, we first need to define, say, European collectors. How to meet the Chinese cultural collectors, to understand this mentality, we will need some discussion to meet these issues.”
Ren also will provide long term storage facilities, and has generous attitude to exhibitors, such as art fairs and auction houses who wish to use his company’s facilities. “There are not many people doing this trade, this side of the art business, if someone wants to put their works here for an exhibition I can provide some finances,” Ren said.
According to Ren about thirty tenants have booked to move in after Chinese New Year, and they are in talks for cooperation with galleries such as Shanghart, and others.