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The choice destination for investments

China Daily Updated: 2018-12-05

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The influx of foreign investments has been growing significantly over the past decades in Shanghai. [Photo by Wang Jianhua / Xinhua]  

With a slew of new measures to boost the efficiency of its business environment, the city is poised to retain its position as a hotbed for foreign capital, say experts

From the beginning of China's reform and opening-up in 1978 to the end of October this year, Shanghai has attracted more than 95,000 foreign-invested projects with the amount of capital utilized hitting $237.6 billion, according to statistics released last week by the Shanghai Municipal Commerce Commission.

The data also shows that the influx of overseas investment has gathered pace throughout the years. For instance, Shanghai took 18 years to hit the first $50 billion mark, while the second threshold was achieved only six years later. The following thresholds for $150 billion and $200 billion landmark took just three years each.

"This shows that foreign enterprises have grown to become important engines for the advancement of Shanghai's economic growth," said Shang Yuying, director of the commission, at a gathering last week to commemorate the contribution of multinational corporations to the city's economic vibrancy.

"Foreign businesses act as critical forces to adjust industrial structure, promote science and technological innovation and enhance urban functions."

The influx of foreign investment, which has been one of the main driving forces of Shanghai's economy over the past four decades, will continue to pick up momentum as a slew of preferential policies will be rolled out to further improve the city's business environment, according to municipal government officials and business representatives in the city.

Some of these policies were mentioned by President Xi Jinping during the China International Import Expo in early November. They include the expansion of the China (Shanghai) Pilot Free Trade Zone to advance investment and trade liberalization, the launch of a technology innovation board and an experimental registration-based initial public offerings mechanism.

These initiatives, along with the commitment to bolster development in the Yangtze River Delta region, will catapult Shanghai to the forefront of leading global city clusters, said Ma Chunlei, vice secretary-general of the municipal government.

"Shanghai welcomes enterprises from all over the world to set foot in the city, establish a presence in the Yangtze River Delta region and train their sights on the whole of China to share the dividends of the region's integration," he said.

A magnet for capital

Shanghai has always been a pioneer in devising novel methods to attract foreign capital. The port city in East China premiered the nation's first foreign investment local regulation. It was also the city that introduced the first batch of national economic and technology development zones in the 1980s.

Last year, foreign companies contributed to more than a quarter of the city's gross domestic product, over one-third of tax income, roughly two-thirds of trade volume and half of R&D spending among industrial enterprises, according to the Shanghai Municipal Commerce Commission.

SAIC Volkswagen, Apple and SAIC General Motors were the top three foreign-invested entities in terms of sales revenue in the city last year. Meanwhile, Changshuo Technology, a key Apple product original equipment manufacturer, Tech-Com (Shanghai) Computer and Intel Trading (Shanghai) generated the highest import and export volume.

Authorities added that the number of foreign companies whose import and export volume and profit surpassed $10 million and 10 million yuan ($1.44 million) at the same time hit 1,348, 11.4 percent more than last year.

Liu Jinping, head of the Shanghai Association of Foreign Investment, pointed out that Shanghai's business environment has also been the reason why business indicators from multinational corporations have been growing. For example, Cabot, a US-based special chemicals and performance materials company, saw its China revenue account for 20 percent of global sales, surpassing its home market, in the fiscal year of 2018.

"Our vision for and commitment to China are long-term because…the width, depth and potential of the Chinese market have yet to be fully explored," said Zhu Ji, the company's senior vice-president and Asia-Pacific president.

"China's development needs to be coordinated with the world's, and the best solution is to continue carrying out bold reforms and opening-up."

China's plans to bolster its business environment for both foreign and private investors have also been recognized by the World Bank. In its survey report which was published earlier in November, China was ranked 46th, up from 78th last year, in terms of the ease of doing business. The bank also hailed Shanghai's progress in improving the efficiency of the business environment.

One of the most notable changes is the process regarding starting a new business in the city — the number of procedures required has been shortened from seven to four. Processing time has also been reduced from 22 days to nine.

"We are seeing substantial enhancements to service efficiency in Shanghai. There's a rather deep level of involvement among the multiple government agencies at the municipality level," said Elton Huang, a Shanghai-based senior partner at PwC China.

He also singled out initiatives such as the International Business Leaders' Advisory Council, an international think tank composed of global executives of MNCs that weighs in on the city's development every year.

Upcoming foreign projects

The city looks poised to maintain its position as a hotbed of foreign investment with 12 major foreign-funded projects scheduled to get underway in the coming years.

Data center solution provider GDS, SAIC General Motors, and German commercial vehicle supplier SAF-Holland are among the host of foreign companies pledging a combined investment of 23.4 billion yuan in the city, the municipality government announced at a signing ceremony in late October.

The largest proposed investment comes from Nio, an electric vehicle startup that said it intends to spend 16.6 billion yuan in the research and development of electric, smart, internet-connected and lightweight cars. French sporting goods retailer Decathlon is also slated to set up a sports equipment headquarters in Shanghai with an estimated investment of 1 billion yuan, while Japanese pharmaceutical company Takeda plans to add another 809 million yuan to its Shanghai operations. Takeda is also on course to introduce seven new medicines to the Chinese market over the next five years.

Meanwhile, Swiss industrial conglomerate ABB Group said it will spend $150 million to build its "largest and most advanced" factory in Shanghai.

"The waves of investment show that Shanghai has become a critical hub and an engine of growth for multinational corporations. Their long-term optimism about investing in Shanghai remains unchanged," said Shang of the Shanghai Municipal Commerce Commission.