Shanghai adopts new foreign investment regulations

On 25 September 2020, the Shanghai Municipal People’s Congress adopted the Shanghai Regulations on Foreign Investment, effective from 1 November 2020 (the Shanghai FDI Regulations). The regulations will apply to all foreign investment projects (existing or potential) located within Shanghai, including the China (Shanghai) Pilot Free Trade Zone and New Lingang Area. The Shanghai FDI Regulations repeatedly emphasise that foreign investors and domestic investors will be treated equally during the entire investment cycle (including at each of the establishment, operation and disposal stages) and no additional market access restrictions shall be set up for foreign investments beyond those specified in the negative list for foreign investment. The Shanghai FDI Regulations specifically set forth preferential treatment for foreign investment in the following encouraged industries: - The National Development and Reform Committee and the Ministry of Commerce jointly issued the Catalogue of Encouraged Foreign Invested Industries on 30 June 20191. If a foreign investment project falls within an encouraged industry under the catalogue, preferential treatment in respect of taxation and use of land may be available. - Foreign invested holding companies will gain full support for their equity investments within China, including measures to facilitate equity purchase/disposal transactions and the cross-border transfer of funds. - Multinational companies upgrading their Shanghai subsidiaries into regional headquarters to manage their business in China or, more generally, Asia will be offered incentives (such as a cash bonus upon opening and rent subsidies) by the local authorities and measures may be available to fast-track or streamline expatriate visa applications, talent hiring, the settlement of funds, trading and logistics, and customs clearance. - Foreign-invested R&D centres will gain greater access to services provided by the local authorities, to facilitate their participation in government-funded R&D programmes, marketing of the fruits of R&D, prosecution (both in China and worldwide) of patents, and the import of equipment and appliances for the purposes of R&D.

• Type:

  • Promotion and facilitation (Special economic zones)

• Industry:

  • Manufacturing (Manufacture of basic pharmaceutical products and pharmaceutical preparations, Manufacture of computer, electronic and optical products, and electrical equipment, Manufacture of machinery and equipment n.e.c.)
  • Services (Wholesale and retail trade, Other professional, scientific and technical activities)

• Sources:

  • Shanghai Municipal People's Government, Announcement of the Standing Committee of Shanghai Municipal People's Congress No.45, https://www.shanghai.gov.cn/nw48050/20201231/f14acce91aa54c51a7a220390b5bec17.html, 31 Dec 2020
  • Reed Smith LLP, Shanghai adopts new foreign investment regulations at municipal level, aimed at optimising its business environment for foreign investors, https://www.lexology.com/library/detail.aspx?g=e301224d-ef95-42a8-ad1b-037665971356&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-10-21&utm_term=, 19 Oct 2020
  • Shanghai Daily, Regulations to enhance confidence of foreign investors, https://www.shine.cn/biz/economy/2009276912/, 27 Sep 2020