Shanghai – The largest city in China and has been a major socioeconomic centre amongst the provinces regarding Gross Domestic Product (GDP). Growing from a humble beginning into an economic powerhouse, Shanghai, coupled with Jiangsu and Zhejiang, forms the east-china region. This region is one of the special economic zones (SEZ), which falls under the government’s national-level strategy to facilitate focused business industries such as electronic information products, biomedicine, and financial services.
Home to the largest number of conglomerate regional headquarters in China, Shanghai is also one of the cities with a population that commands the most substantial spending power. This put the municipality in an excellent position to attract foreign investors and companies. With the recent Shanghai Foreign Direct Investment (FDI) Regulations, 24 new measures were introduced to improve the business environment. The six chapters of regulations cover 51 articles on investment promotion, trade and investment facilitation and intellectual property protection, adding icing to the cake.
Highlights of the New Shanghai FDI Regulations
1. Equal Treatment for Foreign Investors or Companies
There is a heavy emphasis in the chapters to extend the same treatment across foreign investors and domestic investors during the whole investment cycle. There are no additional market restrictions except those specified in the negative list for foreign investment. It is worth noting that foreign investment projects within the Shanghai Pilot Free Trade Zone (FTZ) further lift specific limits on shareholding percentage and business scope. Strategic moves like this reveal the Chinese government’s genuine intention to open up the financial sector and gradually other essential fields.
2. Preferential Treatment for Specific Industries
The Shanghai FDI regulations set forth favourable terms to encourage foreign investment in a particular trade. Some privileges include special taxation, easier access to the use of land and others (Refer to Infographic 1).
3. Making the Processes Convenient for Foreign Investors
Some of the common challenges that foreign businesses face in China are the complex registration process, limitations on cross-border payments and restricted communication and disclosure constraints. Under the new measures, enterprise registrations will be consolidated into a one-stop service online to stamp out these arduous processes. Examples of service available are market access, zoning and planning and foreign exchange registration and approval. Foreign investors can also expect fewer restrictions on cross-border payments with only adherence to Chinese laws and regulations. The Chinese government is devoted to hearing the voices on the ground, and establishing several communication channels to communicate with foreign companies is one way. Some of the mediums include surveys, discussions, and questionnaire. Specific complaint outlets will also be created to allow foreign entrepreneurs to report and seek remedies for any governmental actions that, in their opinion, infringe their legitimate rights and business activities in Shanghai.
Rapidly changing demographics, rising incomes, increased consumer spending, and an increasingly open business environment have all helped make the Chinese market increasingly attractive to western businesses across various industries. With new FDI regulations in play, China represents a vast potential market for foreign investors but accessing these opportunities can be extremely challenging. With no experience in the China business realm, foreign multinationals or first-time market entrant will find their efforts to break through the Chinese market hampered due to insufficient local knowledge.
Look for Professionals with Localised Information
With more than a decade of experience, Desfran has a team of professionals with a local understanding of China’s business ground. Our office in Shanghai provides real-time insights and timely advisory services to manage and mitigate potential pitfalls when entering China’s business market.
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