Why upgrading your Shanghai office could pay off
September 29, 2012 | BY
clpstaff &clp articles &The Shanghai Municipal Government has released Opinions encouraging multinationals to set up regional headquarters there, but will this cause tension with Beijing, which is expected to respond with a counter offer
The Municipal Government issued the Implementing Opinions on the «Shanghai Municipality, Provisions on Encouraging the Establishment of Regional Headquarters by Multinational Corporations» (上海市《上海市鼓励跨国公司设立地区总部的规定》实施意见) on August 8 2012.
The Opinions allow regional headquarters to obtain subsidies of up to Rmb8 million ($1,270,000) for establishing or upgrading existing offices, grants them the ability to manage self-owned funds, simplifies labour and employment issues and facilitates better customs clearance.
Shanghai is hoping to attract more multinationals to set up headquarters and develop the municipality's economy. The city is keen to incentivise and grow the economy through such policies, especially considering the economic downturn in the EU and US.
|Shanghai vs Beijing
In 2008, Shanghai issued similar Provisions and Opinions. Six months later, Beijing reciprocated issuing identical legislation that was more attractive in terms of subsidies for multinationals and their regional headquarters. (See Beijing challenges Shanghai to win regional HQs)
“Beijing and Shanghai are competing to attract more regional headquarters to be established in their own area,” said Zhang Wei, a partner with Jun He Law Offices in Beijing. “It is possible Beijing will consider issuing similar incentives for upgrading regional headquarters soon or later,” she added, following Shanghai's example again.
According to Zhang, Shanghai hosts the most regional headquarters in China. This is because of the favourable conditions the city has to offer not only in terms of policy, but also already established practices and a general perception of ease for multinationals.
|Requirements
The Opinions lay out several requirements for subsidies. For newly-established regional headquarters covering Asia, Asia Pacific or a greater area, companies must have no fewer than 50 employees and their senior management must reside in Shanghai, in order to obtain a subsidy of Rmb8 million, payable within three years over three instalments.
Existing regional headquarters that upgrade their offices to cover Asia, Asia Pacific, or a greater area can obtain a lump sum subsidy of Rmb3 million. In addition, the Opinions facilitate fund management through simplified cross-border renminbi payments and encourage a centralised withdrawal and payment system.
Regional headquarters also enjoy special treatment for labour and employment issues. For example, they can obtain residence permits, permanent residency, urgent entry permits and work certificates for employees smoothly and efficiently. “This gives them more feasibility to transfer and locate employees,” said Zhang.
Customs clearances are also simplified, as regional headquarters can take advantage of a centralised deceleration and clearance system. Facilitating better management and operations of the headquarters together with the subsidies makes the Opinions an attractive offer to multinationals.
It is clear Shanghai wants to achieve industry upgrades and encourage technological innovation through the Opinions. At the same time, the city hopes to promote its regional economic position and become an international trade centre.
Zhang warned that multinationals should be cautious when making the decision to upgrade or establish regional headquarters in China, as various factors and the effects on the business need to be considered. It will also be interesting to see if Beijing follows suit a second time around and what methods it uses to try and beat Shanghai's offer.
A full text translation of the Opinions will appear in the November/December issue of China Law & Practice.
By David Tring
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