Foreign companies welcome in Shanghai

March 17, 2009 | BY

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The Shanghai government has announced a set of incentives to attract more multinational companies to establish their headquarters in the city. By Laura Yuan, King & Wood.

Following the promulgation of a regulation to encourage multinational corporations (MNCs) to establish their regional headquarters in Shanghai in July 2008, Shanghai's government issued a new implementation rule to the regulation on December 3 2008.

Under the Several Implementing Opinions on the «Shanghai Municipality, Provisions on Encouraging the Establishment of Regional Headquarters by Multinational Corporations» (上海市关于《上海市鼓励跨国公司设立地区总部的规定》若干实施意见)a headquarters of an MNC incorporated in or moved to Shanghai will be provided with a series of incentives, in respect of financing and rewards, fund and human resources management, streamlining of entry-exit formalities, facilitating of customs clearance, and so on. The first thing needing to be clarified is that the entity eligible to the incentives shall be a HQ of an MNC, which shall be subject to the approval and ratification of its qualification by the Ministry of Commerce or its competent local counterparts.


Financing and rewards

Shanghai's government proposes to set up a special fund to provide the following financing and incentives to any eligible HQs:


(1) Incorporation financing:
An HQ established in the form of an investment company which is newly registered in or moved to Shanghai, will be given incorporation financing to the sum of Rmb5 million (US$731,000), which shall be paid in instalments over three years.


(2) Rent financing:
An HQ of an MNC newly registered in or moved to Shanghai that rents an office for its own use will be given financing for office rent each year for a term of three years at the rate of 30% of Rmb8 per square metre a day, up to 1,000 square metres If it builds its own office, it will be given monetary financing in a lump sum equal to the total amount of the three-year office rent financing. One restriction needs to be pointed out: if the company, during the period of enjoying such financing, leases or subleases the office for its own use or changes the purpose of the office, it must refund the money.


(3) Rewards to regional headquarters:
An HQ incorporated in the form of an investment company in Shanghai, which has been determined by the Ministry of Commerce as a state-level HQ of an MNC, will be given a reward amounting to Rmb10 million, provided that its annual business revenue exceeds Rmb1 billion for the first time upon being determined; an HQ incorporated in the form of a management company in Shanghai will be given a reward of Rmb5 million, provided that its annual business revenue exceeds Rmb500 million for the first time upon being determined as a HQ. These rewards will be paid over three years at the rate of 40%, 30% and 30%, respectively.


Entry-exit formalities

In addition to the financing and rewards, streamlining the entry-exit formalities is another substantial benefit given under this Rule to the HQs and their employees, foreign or domestic. Benefits include:


(1) Temporary stay in China:
Depending on the positions at which they serve in an HQ of an MNC in Shanghai, a general foreign employee may apply for a multi-entry visitor visa with a valid term of one year; a foreign senior manager or high-tech talent may apply for a multi-entry visitor visa for two to five years, with each temporary stay less than one year.


(2) Long-term residence in China:
The restrictions for long-term residence in China for the following persons have been softened under the Rule: foreign senior management serving for an HQ of an MNC in Shanghai, or any subsidiary incorporated in Shanghai with registered capital of US$30 million, may apply for a five-year residence permit; a department manager serving for any of those companies may apply for a four-year residence permit; and a general foreign employee may apply for a three-year permit.


(3) Emergency entry:
It is permitted for a foreign person to apply to the port visa office of the Exit-Entry Administration Bureau of the Shanghai Public Security Bureau for a port visa, if he is invited to visit Shanghai temporarily by an HQ of an MNC, but fails to apply for a visa in the Chinese embassy or consulate based abroad in time due to an emergency.


(4) Visit to Hong Kong, Macau, Taiwan, or going abroad:
The Rule also provides convenience in policy for domestic employees holding Chinese nationality or a Shanghai permanent residence certificate serving for HQs of MNCs to go through formalities for visits to Hong Kong, Macau, Taiwan, or going abroad.


Besides the above main points, the Rule also provides other support. For example, an HQ is entitled to establish a centralised internal fund management system; an HQ can also enjoy convenience in policy in respect of solicitation of talent and customs clearance.

However, acting as a policy guideline, the Rule fails to provide for specific procedures to apply and procure such benefits, and fulfilment of all the benefits will also refer to other specific provisions promulgated by other competent governmental authorities, as well as co-operation and coordination by and among those authorities and/or any other third party institutions, especially in respect of fund management, foreign exchange operation and customs clearance.

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