Executives at small and mid-sized companies assigned the task of opening a Shanghai office or facility might find that assignment daunting if it’s the company’s first foray into the Chinese market. Their counterparts at large multinationals are better equipped to take the assignment in stride. But the task becomes less overwhelming once the resources are identified that can facilitate — even expedite — the process. Chief among these is the Shanghai Foreign Investment Development Board (FID), a municipal agency charged with helping companies from around the world learn the ropes with respect to opening operations in China’s largest city, navigate the permitting process and obtain the appropriate financial assistance, among other services.
FID is prepared to fast-track new operations if the planned investment is in one of seven “encouraged” industry sectors: information & communications technology (ICT); biopharmaceuticals; finance; new energy vehicles, particularly electric cars; renewable energy and waste treatment; iron and steel and shipbuilding; and aerospace, including aircraft manufacturing and space-related research and components.
Other industry sector categories as defined by the Chinese authorities are “allowed,” “restricted” and “prohibited.” The government makes available incentives and other assistance in all classifications except prohibited. Restricted sectors include media and publishing, activities related to security, certain mining operations and agricultural activities — the latter due to the government’s protection of the environment and the nation’s food supply.
“In the restricted category, we recommend potential investors start small,” says Douglas Dong-Tao, assistant president of the Shanghai Foreign Investment Development Board, “with a representative office, for example — a modest investment. Then, if they find the market is very attractive and they want to build their presence, we will work with the company to upgrade to a wholly owned foreign enterprise or a joint venture,” most likely the latter, he notes. “We help these companies in a very practical way.”
Investments in the encouraged and allowed sectors (allowed meaning most anything not prohibited or defined above) will see the fastest return on investment. “We can use the express track to get everything done,” says Douglas, “especially for the encouraged category. After an enterprise is established, it can receive more incentives, direct financial assistance and, where applicable, worker training and workspace cost subsidization. In the new Pudong area of Shanghai, for example, if a foreign company wants to set up an R&D operation, the district government will subsidize a certain percentage of the rent. We really focus on developing these new sectors in Shanghai.”
This investment profile was prepared under the auspices of the Shanghai Foreign Investment Development Board. For more information, visit www.fid.org.cn.