Over the last decade, businesses in China have gone through remarkable changes. The country’s membership to the World Trade Organization resulted in the liberalization of many industry sectors. Shanghai, more than any part of the country, has led China to great prosperity. The city is notable for reliable infrastructures and business that contributed to the country’s economic growth.
Foreign investors gain interest in doing business in Shanghai because of the new laws and regulations issued after the country’s WTO accession. This led to a great need for investors that could adapt their business operations in China. Investors who operate in logistics, telecommunications, distribution and financial services gain benefits from the WTO liberalization.
Reasons To Do Business In Shanghai
The updated business regulations and tax rules in China resulted to a need for foreign investors in the country. In particular, many businesspersons are interested in doing business in Shanghai because the city is conducive to economic development. Shanghai remains as the country’s most competitive and international city. According to Peter Osborne, Senior Commissioner of Austrade and deputy consul-general in Shanghai, the city offers numerous opportunities for foreign investors. In fact, the Chinese government encourages foreign investment, particularly in priority businesses and industries.
At present, China ranks fourth when it comes to countries with the largest economy. It has sustained an average economic growth of 9.5 percent over the last three decades. In 2007, the country has reached a Gross Domestic Product (GDP) of over $3.4 trillion. It was also during this year when the country had a GDP growth rate of 11.4 percent.
Investment Climate In Shanghai
China utilizes several methods to attract investment in the country. These methods include preferential tax treatment, as well as various incentives provided to investors in high tech industries. Although the government encourages foreign investment, the country also controls and monitors the pace of opening up to other countries. There are still restrictions imposed on foreign investors such as the different requirements for approval, nature and amount of capital contributions. Some sectors also restrict the participation of foreign investors.
The Foreign Investment Catalogue provides an outline that contains information on sectors that encourage, permit, and prohibit investors from other countries. Investment in industries that focus on technology is encouraged, while “prohibited” investment includes the media and other sectors. Nevertheless, the country’s accession to the WTO has caused the narrowing down of areas with investment restrictions. This paves the way for foreign investors to engage in numerous businesses in Shanghai, and other major cities.
How To Enter The Chinese Market
Foreign investors have various options when they intend to enter the Chinese market. For instance, they can consult the Shanghai American Chamber of Commerce for details on investing in the city. Those who plan to obtain the cheapest and easiest way to start a business is by setting up a rep office. There are limitations, though, because investors are not allowed to sell services and products in the local economy. This type of business only serves as a marketing office for products imported to China by a parent company.
A joint venture is another type of business that allows a foreign company to have a partnership with a Chinese company. The co-operative joint venture and equity joint venture are among the options that foreigners have when they intend to do business in Shanghai. The only drawback is that there are legal issues associated in this form of investment.
Lastly, the Wholly Owned Foreign Enterprise serves as another investment option. The foreign company owns all the assets and makes a capital investment for the business. However, the government will require the business to demonstrate evidences that it will benefit the Chinese economy.