Issuing the Guidelines of Shanghai Municipality for Foreign Investment in Industry Circular

(Issued by the Shanghai Development and Reform Commission, the Shanghai Foreign Economic Relations and Trade Commission and the Shanghai Economic Commission on, and effective as of, September 15 2003.)

To the people's government of each district and county of Shanghai, and each commission, office and bureau of the Shanghai municipal government:

Pursuant to relevant State laws and policies on foreign investment, the Guiding the Direction of Foreign Investment Provisions approved and promulgated by the State Council on February 11 2002 and the Foreign Investment Industrial Guidance Catalogue issued on March 11 2002 by the former State Planning Commission, State Economic and Trade Commission and Ministry of Foreign Trade and Economic Cooperation, and in light of the actual circumstances in Shanghai, the Shanghai Development and Reform Commission, the Shanghai Foreign Economic Relations and Trade Commission and the Shanghai Economic Commission, in conjunction with the relevant authorities, have jointly studied and formulated the guidelines of Shanghai municipality for foreign investment in industry, in order to more actively, rationally and effectively use foreign investment and guide the direction of foreign investment in industry in line with the municipal government's unified plan. After the approval of the municipal government, we hereby issue you with the Key Industries for Foreign Investment in Shanghai Municipality Catalogue
(Annex 1) and the Distribution of Industries with Foreign Investment in Shanghai Municipality Guidelines (Annex 2), which are to be implemented from today, and ask that you duly publicize them to, and guide, foreign business entities.

During the 10th five-year plan, Shanghai will vigorously develop six major pillar industries (including the information industry, the finance industry, the trading industry, the motor vehicle manufacturing industry, the complete equipment manufacturing industry and the real estate industry) and actively develop four major new industries (the biopharmaceutical industry, the new materials industry, the environmental protection industry and the modern logistics industry). Shanghai also intends to optimize and develop two major basic industries, the petrochemical industry and the iron and steel industry, make efforts to develop the equipment industry and the ship building industry, accelerate the development of a modern service industry, intensify efforts to attract multinational corporations into establishing regional headquarters and R&D institutions and accelerate the establishment of a new type of industrial system that can meet the needs of a large international metropolis. Responding to the requirements for the establishment of a new type of industrial system and for guiding foreign-invested projects to congregate in development zones at various levels and of various types so as to produce an arrangement in which the Pudong New Area and other State-level development zones act as leaders, major industrial bases act as supports and municipal-level development zones, such as the municipal-level industrial parks and modern logistics parks, act as extensions, Shanghai will accelerate and encourage the development of industrial concentration and promote the rational distribution of industries.

The Key Industries for Foreign Investment in Shanghai Municipality Catalogue published by Shanghai Municipality includes some industries restricted by the State, as a result of which such matters as market access, limits on equity participation, tax exemptions for imported equipment and project approval for these industries will continue to be handled in accordance with relevant State provisions. Where a foreign investment project involves quotas and/or permits, the relevant application must first be made to the government authority in charge.

Investment projects established by investors from the Hong Kong SAR, the Macao SAR and Taiwan will be handled with reference to the Key Industries Catalogue and the Distribution of Industries Guidelines. In the area of services trading, for the Hong Kong SAR, matters will be handled in accordance with the Mainland/Hong Kong Closer Economic Partnership Arrangement.

Annex 1: Key Industries for Foreign Investment in Shanghai Municipality Catalogue

1. Manufacturing

(1) Modern Biological and Pharmaceutical Manufacturing

(i) Manufacture of biotechnologies and biological products.

(ii) Manufacture of new types of synthetic and semi-synthetic chemical pharmaceuticals.

(iii) Manufacture of technologies for new types of preparations and manufacture of new types of preparations.

(iv) Modernized traditional Chinese medicine technologies.

(v) Artificial organs.

(2) New Materials

(i) Nonferrous metal materials.

(ii) Organic chemical materials.

(iii) Other non-metallic materials.

(iv) New types of composites.

(3) Electronic and Communications Equipment Manufacturing

(i) Integrated circuit design, packaging and testing and the manufacture of large-scale integrated circuits with geometries of 0.35 microns or less.

(ii) Manufacture of microelectronic equipment, accessories, raw materials and components.

(iii) Manufacture of electronic information products, with a focus on communications and network equipment.

(iv) Manufacture of computers and spare parts therefor.

(v) Manufacture of electro-vacuum components.

(vi) Manufacture of digital audio and video electronic products

(4) Motor Vehicle Manufacturing

(i) Manufacture of fuel cell, gas-fuelled and solar-powered motor vehicles.

(ii) Manufacture of assembled automobiles, buses, motorcycles, transport vehicles and special high performance vehicles.

(iii) Manufacture of key vehicle parts and components.

(5) Shipbuilding

(i) Design, manufacture and repair of special types of vessels and high performance vessels.

(ii) Manufacture of main vessel engines, key electric and mechanical components for vessels, communications and ancillary equipment for use in vessels.

(6) Equipment Manufacturing

(i) Manufacture of precision processing equipment.

(ii) Manufacture of digital, smart measuring and automatic control equipment.

(iii) Manufacture of modern ancillary traffic and transportation equipment.

(iv) Manufacture of urban rail traffic equipment.

(v) Manufacture of modern logistics equipment.

(vi) Manufacture of power station and power transmission and distribution equipment.

(vii) Manufacture of new types of environmental protection equipment.

(viii) Aerospace manufacturing.

(ix) Manufacture of medical apparatus, instruments and equipment.

(x) Manufacture of engineering machinery.

(xi) Manufacture of apparatus, instruments and specialized tools.

(7) Petrochemical and Fine Chemical Manufacturing

(i) Downstream processing of petrochemicals.

(ii) Serial processing of natural gas chemicals.

(iii) Serial processing of phosgene derivatives.

(iv) Serial processing of fine chemicals.

(v) Processing of polymer materials.

(8) Fine Iron and Steel Manufacturing

(i) Manufacture of steel for motor vehicles and household electrical appliances.

(ii) Manufacture of special seamless steel pipes and ducts for oil and power.

(iii) Manufacture of plate, pipes and ducts for use in vessels.

(iv) Manufacture of stainless steel.

(v) Manufacture of silicon steel and high-performance construction steel.

(9) Metropolitan Industries

(i) Fashion and accessories.

(ii) Printing of packaging and advertisements.

(iii) Handicraft and tourist souvenirs such as diamonds, jewellery, etc.

(iv) Timepieces and cultural and sports articles.

(v) Processing and manufacture of foodstuffs.

(vi) Industrial design and mould making.

2. Services

(1) Financial Services

(i) Banks and finance companies.

(ii) Insurance companies.

(iii) Securities companies, securities investment fund management companies.

(iv) Lease finance companies.

(v) Insurance intermediary companies.

(2) Logistics

(i) Third party logistics enterprises.

(ii) Warehousing facilities and distribution centres.

(iii) Domestic and international freight agencies.

(iv) Multi-modal transportation.

(v) Road transportation.

(vi) Development of and consulting on logistics information systems.

(3) Sales

(i) Enterprises that wholesale and retail general merchandise.

(ii) Foreign trade enterprises that deal in general merchandise.

(iii) International procurement centres.

(4) Social Institutions

(i) Cooperative joint venture schools for higher learning.

(ii) Vocational skills training.

(iii) Construction and operation of cinemas.

(iv) Outstanding artistic performances from around the world.

(v) Medical and health services.

(vi) Sports competitions, performances and construction of sports facilities.

(5) Scientific Research and Comprehensive Technical Services

(i) Research and development institutions (centres).

(ii) Development of biological, isotopic, radioactive, laser, marine, energy-conservation, resource recycling, environmental protection, civilian satellite and other such technologies.

(6) Real Estate

(i) Development and construction of ordinary commodity housing.

(ii) Renovation of old areas.

(iii) Office buildings.

(iv) Architectural design companies.

(v) Interior design companies.

(7) Tourism

(i) Operation of international conventions and exhibitions.

(ii) Travel agencies.

(iii) Catering.

(iv) Sports clubs.

(8) Information and Consulting Services

(i) International economic, scientific, technological and environmental protection information and consultancy services.

(ii) Accounting and auditing.

(iii) Various brokerage and intermediary services.

3. Urban Infrastructure and Public Utilities

(1) Rail traffic, highways, bridges, tunnels, civil airports, ferries and public jetties at ports.

(2) Comprehensive development, construction and renovation of public parking lots, parking lots for public transport and transportation hubs.

(3) Production and supply of gas and water.

(4) Urban pipe networks for gas, heating and water supply and discharge.

(5) Sewage and garbage treatment plants, hazardous waste treatment and disposal plants (incinerators and landfills) and facilities for the control of environmental pollution.

(6) Clean energy resources (including solar energy, wind energy, magnetic energy, geothermal energy, tidal energy, biomass energy, etc.).

(7) Telecommunications.

4. Agriculture, Forestry, Animal Husbandry and Fisheries

(1) Breeding of animals, fine plant seeds, seedlings and fungi (not including precious and fine varieties unique to China), industrial production of new high-quality, high-yield varieties, breeding and raising of famous and high-quality aquaculture products.

(2) Cultivation using modern facilities.

(3) Pollution-free cultivation.

(4) Refined processing of agricultural products.

(5) Deep sea fishing.

Annex 2: Distribution of Industries with Foreign Investment in Shanghai Municipality Guidelines

In accordance with the plan to create a prosperous city centre and permit the suburbs to realize their actual strengths, the plan for economic and social development in Shanghai during the 10th five-year plan and the urban master plan of Shanghai Municipality, we present the guidelines on the distribution of industries with foreign investment in Shanghai in order to guide the direction of foreign investment, so as to enable foreign investment to better promote Shanghai's economic and urban development, and lead foreign investment projects into congregating in industrial parks.

1. Pudong New Area

Pudong New Area is a leader in China's policy of development and opening to the outside world. The Pudong New Area should continue to intensify the development and opening of Pudong, accelerate and promote development in four key areas, the Lujiazui Finance and Trade Zone, the Jinqiao Export Processing Zone, the Waigaoqiao Free Trade Zone and Zhangjiang High-tech Park, focus on developing high-tech industries and modern service industries and strive to become one of Shanghai's externally oriented, multi-functional and modernized urban areas.

Lujiazui Finance and Trade Zone will focus on developing such modern service industries as the finance and trade industries, accelerate its attraction of the regional headquarters of multinational corporations, actively develop factor markets and plan its development into a central commercial area.

Jinqiao Export Processing Zone will focus on developing such industries as the electronic information industry, the automobile and automotive parts and components industries, the modern home electrical appliance industry, the biopharmaceutical industry, etc.

Waigaoqiao Free Trade Zone will accelerate the development of four major functions, export processing, modern logistics, international trade, and bonded merchandise trade and exhibition.

Zhangjiang Hi-tech Park will adopt research and development of technology and innovative manufacturing as its guide in focusing on the development of such industries as the biopharmaceutical industry, the information industry, etc.

2. State-level Economic and Technology Development Zones

Caohejing Hi-tech Park, Minhang Economic and Technological Development Zone and Hongqiao Economic and Technological Development Zone, Shanghai's earliest state-level development zones, will further improve their development zone functions, perform their roles as models and leaders in the development, construction and management, etc. of development zones and drive the improvement in the overall capability level of Shanghai's development zones.

Caohejing Hi-tech Park will focus on developing such new and high technology industries as the micro-electronics industry, the photo-electronics industry, the computer and software industry, the new materials industry, etc.

Minhang Economic and Technological Development Zone will focus on developing such industries as the electrical and mechanical equipment industry, the modern bioengineering and pharmaceutical industries, the beverage and leisure foodstuff industries, etc.

Hongqiao Economic and Technological Development Zone, characterized as a foreign trade centre, will focus on developing such industries as the trade industry, exhibitions, fairs, etc.

3. Export Processing Zones

With the approval of the State Council, Shanghai established the Songjiang, Jinqiao, Qingpu, Caohejing and Minhang Export Processing Zones and, through policy support and standardized, highly efficient services, has accelerated the concentration of enterprises that generate foreign exchange through exports, thus enabling these zones to become Shanghai's leading zones for high and new technology industries, key zones for generating foreign exchange through exports and zones with concentrations of high quality human resources.

Songjiang Export Processing Zone will focus on developing the electronic information industry and supporting industries, driven by such information products as notebook computers, etc. Jinqiao Export Processing Zone (southern area) will focus on developing such industries as the electronic information industry, the precision components industry, the new materials industry, etc. Qingpu Export Processing Zone will focus on developing such industries as the precision mould industry, the LCD industry, the TFT industry and communications equipment industry, etc. Caohejing Export Processing Zone will focus on developing an electronic information product manufacturing industry centred on computers, new electronic components, communications and networking equipment, etc. Minhang Export Processing Zone will focus on developing such industries as the electronic information industry, the optical-mechanical-electrical industry, the precision machinery industry, the high fashion industry, the hardware and components industry, etc.

4. Main Industrial Bases

Based on Shanghai's urban master plan and industrial development plan, the city will focus on promoting the development of four large industrial bases, namely the suburban microelectronics base, international automobile city, the fine iron and steel base and the chemical industry zone, plan and develop a new urban industrial area and a shipbuilding industry base close to the port and accelerate the development of industrial concentration.

Shanghai's microelectronics industry base will comprise a core area and an expanded area. The core area will be the Pudong microelectronics industry belt centred on Zhangjiang Hi-tech Park and extending to the Jinqiao Export Processing Zone and Waigaoqiao Free Trade Zone. The expanded area will include Caohejing Hi-tech Park, Songjiang Science and Technology Park and Export Processing Zone, Qingpu Industrial Park and Shanghai National Integrated Circuit Design Industrialization Centre. The microelectronics base will develop into one of the world's main microelectronic development and production bases. It will focus on developing chip manufacturing and design, chip packaging and testing, a microelectronic research and development system, the microelectronics equipment manufacturing industry, the microelectronics raw materials industry and other ancillary industries so as to produce an integrated industrial chain.

Shanghai International Automobile City, located in Jiading District, will basically develop into Asia's largest, most functionally complete comprehensive automotive industry base. It will focus on developing such industries as the assembled vehicle and automotive parts and components research, development and manufacturing industries, the automobile trading industry, the automobile logistics industry, the automotive science, education and exhibition industry, the automobile culture and touring industry, the automotive service industry, etc.

Shanghai's fine iron and steel base, located in Baoshan District, will be China's largest base for the production of fine iron and steel products and for the research and development of iron and steel technologies. Formed mainly through the establishment of four large intensive fine iron and steel product bases, the Baogang Steel ordinary carbon steel manufacturing base, the No.1 Steel Works stainless steel manufacturing base, the No.5 Steel Works special steel manufacturing base and the Luojing Steel iron and steel downstream processing base, the base will focus on developing fine iron and steel products such as steel for motor vehicles, oil pipes, plates used in shipbuilding, stainless steel, silicon steel, high performance construction steel, etc.

Shanghai's Chemical Industry Park, located on the north shore of Hangzhou Bay south of Shanghai, will develop into an environmentally friendly industrial city with internationally advanced process technology, the largest economic scale in Asia, a world class management model and characterized by the harmonious development of production, ecology and environmental protection. It will focus on developing six major lines of chemical products: petrochemical downstream processing products and natural gas chemical serial processing products, phosgene derivative serial processing products, fine chemical serial processing products, polymer material processing products, comprehensive downstream processing products and high science and technology bioengineering products.

The modern equipment manufacturing base of Shanghai's harbour view new city industrial zone, to be located in Nanhui District, where the plan is to establish the Shanghai harbour view new city industrial zone combining the six major functions of advanced manufacturing, modern logistics, R&D services, export processing, free trade and education/training, will become a base for modern equipment manufacturing. It will focus on developing the following 10 major industries: the precision processing equipment manufacturing industry; the digital smart measurement and automatic control equipment manufacturing industry; the modern traffic, transportation and modern logistics equipment industry; the new environmental protection equipment manufacturing industry; the medical apparatus, instrument and equipment manufacturing industry; the electronic communications and network product manufacturing industry; the new component manufacturing industry; the new materials industry; the modern logistics industry; and the R&D and vocational education and training industry.

Shanghai's shipbuilding base, located on Changxing Island, Baoshan District, where the plan is to establish China's largest shipbuilding, vessel maintenance and ancillary industry base, will become an internationally competitive base for optimizing conventional vessels and developing high and new technology vessels, a manufacturing base for vessels with a high technology content and a high value added, a base for manufacturing the main engines and key components for vessels and an ancillary base for system integration and integrated supply. It will focus on developing the shipbuilding and vessel maintenance industries and ancillary industries. In addition, projects for ancillary mechanical and electrical equipment for vessels will be planned and established with the focus on developing industries that support vessel assembly yards including the electrical apparatus industry, the automatic control systems industry, the communications equipment industry, the vessel instruments and apparatus industry, the deck machinery industry, the cabin machinery industry, etc.

5. Municipal-level Industrial Parks

The municipal-level industrial areas are the loci for the development of manufacturing industries in Shanghai's suburbs. The establishment of nine municipal-level industrial parks including those in Jiading, Songjiang and Qingpu will be accelerated to form a development paradigm wherein many industries coexist with single dominant industries, produce skewed competition but harmonious development and enhance the reserve strengths to develop Shanghai's districts and counties.

Jiading municipal-level industrial park will focus on developing such industries as the automotive parts and components industry, the photo-electronic information industry, the environmental protection equipment manufacturing industry, etc. Songjiang municipal-level industrial park will focus on developing such industries as the microelectronics industry, the non-polluting new materials industry, the biopharmaceuticals industry, the foodstuff and health product production industry, etc. Qingpu municipal-level industrial park will focus on developing such industries as the information and communications industry, the biopharmaceutical industry, the modern textile non-polluting new materials industry, the non-polluting precision machine processing industry, etc. Minhang municipal-level industrial park will focus on developing such industries as the computer and communications equipment manufacturing industry, the household electrical appliance industry, the new materials industry, etc. Baoshan municipal-level industrial park will focus on developing such industries as the fine iron and steel products extended processing industry, the modern machinery manufacturing industry, the new materials industry, the heavy-duty container transportation equipment industry, etc. Jinshan municipal-level industrial park will focus on developing such industries as the fine chemicals processing industry, the chemical construction materials industry, the foodstuff processing industry, etc. Nanhui District will focus on developing such industries as the electronic appliance industry, the automotive parts and accessories industry, the new construction materials industry, etc. Fengxian municipal-level industrial park will focus on developing such industries as the electronic communications equipment manufacturing industry, the power transmission and distribution equipment manufacturing industry, the electronic machinery and equipment manufacturing industry, etc. Chongming municipal-level industrial park will focus on developing environmentally friendly industries.

6. Modern Logistics Park

By relying on the comprehensive strengths of its deep water ports, airports and land transportation, Shanghai will exploit its port capabilities to focus on establishing four large logistics parks, the Waigoaqiao Logistics Park, the Pudong Airport Logistics Park, the Northwest Logistics Park and the Deep Water Port Logistics Park.

Waigaoqiao Logistics Park will use the advantages offered by the port district and the free trade zone to establish an area where the distribution centres of multinational corporations concentrate and to form a logistics park that enables the bonded transit of goods. Pudong Airport Logistics Park will use the advantages of speed and convenience offered by air transport and take the opportunity presented by the establishment of an Asia-Pacific regional airport hub to form an aviation logistics hub with comprehensive service capabilities. By focusing on inter-provincial logistics collection and distribution, the Northwest Logistics Park will enhance the cargo stowage and trading functions of overland cargo transport and trading centres and create an overland logistics hub for Shanghai that extends to the Yangtze delta and inland provinces. The Deep Water Port Logistics Park will use the advantages offered by the deep water ports to link up with domestic and international logistics networks to form the largest, most extensive as well as the Asia-Pacific region's most important, comprehensive port logistics base, which will be able to match the northeast Asian international air freight centre.

7. Modern Agricultural Parks

Shanghai's development of modern agriculture will be mainly concentrated in the following districts and counties; Minhang, Jiading, Baoshan, Pudong, Nanhui, Fengxian, Songjiang, Jinshan, Qingpu, Congming, etc., and the Agriculture, Industry & Commerce Group and the Shangshi Group will establish 12 modern agricultural parks that will focus on developing the cultivation of seed resources, environmentally friendly agricultural products, vegetables, flowers, high quality commodity grains, orchards, landscaping, etc., the breeding and raising of crab larvae and commodity crabs, aquaculture products, goats, dairy cows, triple-breed hybrid pigs, etc. and the development of such functions as agricultural product processing, logistics, agricultural science and technology, agricultural sightseeing, leisure, etc.

8. Miscellaneous

This includes the Sheshan State-level Tourist Resort, Shanghai International Medical Science Park, Zizhu Science-based Industrial Park and Spark Development Zone, etc. Of these, the Sheshan State-level Tourist Resort will establish a metropolitan tourism, leisure and vacation area centred on ecological and greenery preservation, its natural scenery and water tourism. Shanghai International Medical Science Park, with the establishment of hospitals as its principal activity, will drive the development of related health industries to give rise to a comprehensive medical science park that combines medicine, teaching, research and production. It will focus on developing such industries as the medical apparatus, instrument and equipment manufacturing industry, the research and development industry and the special medical service industry, etc. Zizhu Science-based Industrial Park, characterized by knowledge-based industries, will focus on developing industry in the following three broad categories: the information industry, the new materials industry, and the biological and modern agriculture industry, in order to establish a modern science park that integrates production, learning and research. Spark Development Zone will focus on developing such industries as the textile chemical fibre industry, the pharmaceutical production industry, the papermaking industry, the construction materials industry, etc.