Shanghai Bound: New Regulations Seek to Attract Regional HQs

September 02, 2002 | BY

clpstaff &clp articles

On July 20 2002, the Shanghai municipal government issued the Encouraging the Establishment of Regional Headquarters by Foreign Multinational Corporations Tentative Provisions (the Tentative Provisions) to make itself attractive as a centre for international business, but how inviting are the provisions in the new law?

Many multinational companies, particularly those that have multiple investment projects in China, have long asked the Chinese government to recognize their need for in-country holding companies. Ideally, such holding companies should be able to consolidate their financial support, IT support, HR management, sales and marketing, technology support, general administrative support, import and export, R&D and other functions.

In response to such demands, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) has, since 1995, allowed about 180 multinational companies to set up their holding companies (termed "investment companies" by MOFTEC) in China.1 However, in spite of several amendments to the 1995 regulations, the current MOFTEC regulations are still very conservative, and many multinational companies still do not feel an investment company is worth its price tag: the MOFTEC regulations require US$30 million in new investment for investment companies, and the benefits are still very limited.

Competition at Home and Abroad

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