The Shanghai Lawyer
Vol. 1 , No. 03 - February 1, 2002
Shanghai is one of the most dynamic and fastest growing mega-cities in the world. It is quickly establishing itself as the leading financial and economic center of the Far East, on par with the likes of Paris and New York. The Shanghai Lawyer is a bi-weekly publication providing up-to-date newsworthy articles and legal information to professional and business persons around the world. We hope you enjoy the newsletter and welcome your comments and feedback.
New Policies Designed to Attract Foreign Players
China will unveil new policies this month to attract foreign investment, according to Chinese-language Jingji Guancha Bao economic newspaper, quoting "authoritative" sources.
In the past, the Central Government had granted tax breaks to certain foreign investors, but these concessions will be phased out following accession to the World Trade Organization. Up until now foreign investors faced limits in certain sectors, but senior officials have hinted that the new policies would end these restrictions, particularly in the areas of trade and services.
The new policies are also expected to open investment banking, insurance and travel services, as well as construction, accounting, education, aviation, and telecommunications to foreigners. The government has prepared a list of high-technology projects in which it wants to encourage foreign investment, according to the sources.
In the financial industry, foreign investors will be encouraged to take part in the overhaul of state-owned enterprises and in the restructuring and disposal of non-performing loans. The new policies will address issues such as restrictions on registered capital ratios of foreign enterprises, industrial property rights and preferential tax treatment for investors in the integrated-circuit industry.
The new policies also will encourage foreign-invested companies to increase exports. China would like foreign investors to set up export processing centers They will loosen restrictions on joint-venture foreign trade companies and encourage foreign multinationals to use the Mainland's small and medium-sized enterprises for services. The new policies reportedly will loosen curbs on fund-raising if foreign firms plan to invest in the western region.
(Source: South China Morning Post)
Private Companies Add to Tax Base
The economic strength of private companies in Shanghai is increasing rapidly and along with this so is their contribution to the tax base. According to statistics of the Municipal Financial Bureau, last year the tax income generated by Shanghai private companies came to US$ 1.2 billion, US$ 465 million more than the previous year, an increase of 63.88 percent. The percentage of the total tax base generated by private companies increased from 6.61% to 9.13% year to year.
By year end, private companies in Shanghai numbered 176,000, an increase of 27.6% from the previous year. The total amount of registered capital of private companies increased 52% this past year to US$ 21.8 billion. The size of Shanghai private companies also increased rapidly during the last year with 82 having a registered capital in excess of US$ 12 million, double that of the previous year.
(Source: www.sina.com)
Shanghai Essentials
There are a series of favorable policies for setting up companies in Wai Gao Qiao Free Trade Zone in Shanghai. For example, in respect of investment policies, Wai Gao Qiao is open to all domestic companies and foreign enterprises. It approves the set up of companies in the fields of trading, storing and distributing, processing and other services in the form of sole proprietorship, joint ventures, wholly owned foreign companies and cooperatives. No matter which field, foreign nationals can apply for 100% control of the company. |
Rents Rocket as Multinationals Eye Packed Pudong
Office rents in Shanghai's Pudong district rose 26.39 per cent last year, in contrast to a fall of 29.35 per cent in Hong Kong, according to a survey. The rate of increase topped the nine cities and districts in the greater China zone surveyed by property consultant DTZ Debenham Tie Leung.
Pudong's occupancy costs - rents and outgoings - per month were HK$21.07 per square foot, making it the fourth most expensive center surveyed. Hong Kong led the list at HK$48.61 per square foot. Taiwan was second most expensive at HK$29.76 and Beijing third at HK$26.58. Pudong was ranked the 10th most expensive place in the Asia-Pacific region, up from 13th in 2000.
DTZ research director Alva To said Shanghai, as a key commercial city in China, would benefit most from the mainland's membership of the World Trade Organization. Mr. To said more multinational corporations were expected to establish regional offices in Shanghai's financial districts. However, Mr. To said rental increases would vary from district to district: the Lujiazui financial area in Pudong would see a 15 per cent rise in office rents this year due to limited supply. Puxi, Shanghai's traditional business district, saw a modest 5.14 per cent increase in its occupancy cost last year to HK$20.05 per square foot. The vacancy rate in Pudong was sharply lower, standing at 12.4 per cent last year down from 28 per cent in 2000, while Puxi's vacancy rate decreased marginally to 15 per cent from 15.8 per cent. Changning district was the sub-area with the highest vacancy rate, followed by Huangpu, Lujiazui, Luwan, Xuhui and Jingan.
In contrast to Shanghai, Beijing suffered an average rental decrease last year, with the rate falling 6.18 per cent to HK$26.58 per square foot. DTZ said grade-A office take-up in Beijing fell from 1.27 million square meters in 2000 to 314,000 sq meters last year. The vacancy rate jumped from 7.2 per cent to 12.5 per cent.
Mr. To said Shenzhen and Guangzhou recorded an increase of almost 10 per cent in occupancy costs but office rents varied considerably within the cities due to a great range of quality property. Shenzhen was the fifth most expensive city in Greater China with Guangzhou sixth. Hong Kong suffered a 29.35 per cent decline in occupancy costs last year but its Asia-Pacific ranking was still up to second from third place, overtaking Tokyo's outer area which recorded a 45.2 per cent drop. Tokyo's central area remained the most expensive in the Asia-Pacific region despite a 32.4 per cent fall last year. Hong Kong's global ranking was fourth, up from fifth in 2000.
(Source: South China Morning Post)
Shanghai Vows to Increase Exports by 5% in 2002
Shanghai government is pushing the city's manufacturing community to increase exports by 5% this year, according to vice-mayor Jiang Yiren during an address to hundreds of government and corporate officials at a trade conference. To achieve the goal, Shanghai has to ship out goods worth US$29 billion during the year. Normally, the city's exports account for 10 percent of the nation's total.
In order to ensure the city's exports don't fail to meet target levels, the government is implementing policies to aid the export sector. Top priority is being given to speeding up construction of projects that will focus on producing goods for overseas markets. Two such projects are being pushed heavily, a US$7.5-billion plant owned by Grace Semiconductor, the city's largest overseas-invested project expected to start production this year and a factory for Shanghai SVA, which manufactures DVD players.
Shanghai also visualizes a US$1 billion to US$2 billion windfall by convincing more multinationals to set up their Asian sourcing headquarters in the city. Incentives will be given to companies that do their sourcing in Shanghai, including granting purchasing wholesaling licenses.
China's entry into the WTO is also expected to help exports, with textile makers receiving a boost as many large countries increase quotas on Chinese-made goods. But it also means local exporters must now worry about a flood of anti-dumping by other WTO members.
(Source: Shanghai Daily)
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More Cash Promised to Clean up the City
Shanghai is expected to draft a new three-year plan and promises to spend more to improve air and water quality, cultivate green areas and clean up industrial zones, the Shanghai Environment Protection Bureau said yesterday.
During its current three-year plan, which runs from 2000 to this year, the city will spend US$571 million on 113 environmental projects. It is trying to reform the way environmental projects are funded the bureau said.
The bureau is trying to recruit private investment to help finance conservation projects. It has begun using the BOT mode of funding for some projects that lets private companies operate endeavors they have paid to build for several years to earn back their expenses. The projects are then transferred over to government ownership.
(Source: Shanghai Daily)
Foreign Firms Face Stricter Listing Rules
Shanghai foreign funded companies aiming for listing on the mainland's stock markets will have to reveal more information than domestic companies in the same position, according to a new plan of the China Securities Regulatory Commission.
In addition to the information required by domestic companies, foreign-invested companies will have to disclose risks involved with their overseas raw material procurement process, data on technology transfer, certain technical and financial information on transactions with their parent company over the past three years, and possible changes in preferential tax policies, Dow Jones newswire reported.
Furthermore, firms that invest part of their profits in overseas projects need to make public, details on the projects, and the future management role of the company. Despite the stricter regulation, China aims at drawing the interest of foreign invested companies to its stock market, in an effort to boost the struggling indexes.
A dozen foreign companies including HSBC, Hong Kong's Bank of East Asia, Procter & Gamble, Royal Philips Electronics have shown interest to apply for listing, but contrary to some rumors in the Chinese media - none of them have yet applied for a listing.
(Source: www.chinabiz.org)
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