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100 Questions Concerning Foreign Investment (Shanghai)

(1-10)(2-18)
GENERAL BACKGROUND OF SHANGHAI

The city of Shanghai, also known as "Hu" or "Shen" for abbreviation, is located at Longitude 121"29"east and latitude 31 "14" north. Lying on the western coast of the Pacific Ocean, it stands at the mid-point of China's north-south coastal line where the Yangtze River and the Qiantangjiang River converge and pour themselves into the sea. Surrounded by the Yangtze River on the north, the East China Sea on the east, the Hangchow Gulf on the south and Jiansu and Zhejiang provinces on the west, Shanghai enjoys great advantages in its easy transportation, vast territory and ideal location. All these factors have made Shanghai an excellent port.
Except for such hills in the south-west as She Shan and Tianma Shan, most of the region of Shanghai lies in the broad and even alluvial plain of the Yangtze Delta, rising around 4 meters on average above the sea level. Within Shanghai's territory are the Chongming Island, the 3rd largest island in China, and other isles such as Changxing and Hengsha. The suburban areas are densely spotted with natural river ports. Winding its way through the city, the Huangpu River, together with the Suzhou Creek as its tributary, provides significant navigation channels for the Tai Lake water system.
Of monsoon climate in the northern subtropical zone, Shanghai enjoys a comfortably warm and humid climate, sufficient rainfall and distinct changes of seasons. Yearly temperature averages 16.5t Celsius, with the lowest monthly average at about 5.1t in January and the highest at 28t in July or August. Frost-free period contains about 24 days every year, and the annual rainfall is registered to be 1304 millimeters.
The city of Shanghai is composed of 1 new area, 15 urban administrative districts and 3 suburban counties. The new area is the Pudong New Area; the 15 urban administrative districts are: Huangpu, Luwan, Xuhui, Changning, Jing'an, Puto, Zhabei, Hongkou, Yangpu, Baoshan, Jiading, Jinshan, Minhang, Songjiang and Qinpu, respectively; and the 3 suburban counties are Nanhui, Fengxian and Chongming.

A. Investment Policies & Relevant Regulations
In Pudong New Area and Other Development Zones, Industrial Zones and Export Proussing Zones
1. Where is Pudong New Area?
Triangular in shape and adjacent to the city center, Pudong New Area lies in the east of Shanghai, I.e. to the east of the Huangpu River and to the southwest of the mouth of the Yangtze. It is planned to develop an area of 522 sq.kms., most of which is within a 15 km radius from the city's downtown area.

2. What sort of tax preferential policies can foreign investors enjoy in pudong New Area  ?up 
(1) The income tax of foreign-invested manufacturing enterprises shall be levied at a reduced rated of 15%.
(2) Foreign-invested enterprises scheduled to operate for a period over 10 years shall be exempted from income tax in the first two years starting from the profit-making year and be granted a 50% reduction in the next three years.
(3) "High-tech Projects" invested by foreign investors in Pudong New Area can enjoy 10% income tax rate for another three years after the period of tax exemption and tax reduction. Export enterprises with foreign investment shall pay their income tax at a reduced rate of 10% when their annual export sales value amounts to more than 70% of the annual sales value.
(4) The income tax of foreign-invested enterprises in the field of ports, energy and transportation shall be levied at a reduced rate of 15%. If the operation period of the above-mentioned enterprises is over 15 years, the income tax shall be exempted for the first 5 years starting from the first profit-making year and allowed a 50% reduction in income tax for the next 5 years.
(5) The buildings or houses built or purchased by foreign investors for their own use shall be exempted from house property tax for five years, starting from the date when the transaction is done.
(6) The foreign-invested banks and JV banks with its injected capital over USD10 million or its operating fund allocated by its headquarters over USD10 million, after approval, can enjoy a reduced income tax rate at 15%. And starting from the first profit-making year, the above-mentioned enterprises can enjoy income tax exemption for one year and 50% income tax reduction for another two years.

4. How do you apply for the establishment of duty-free warehouses and duty free processing factories? up
To apply for the establishment of a duty free warehouse, you will have to submit your application and business license issued by the Industrial and Commercial Administration Office together with relevant documents issued by the competent department of the Foreign Economic and Trade Commission to the Customs House. Once examined, spot-investigated and approved, the Customs House will promulgate a Duty-Free Warehouse Registration Certificate. Only then can you start the business.
To set up a duty free processing factory, you shall entrust either an authoritative department ratified by the government dealing with import and export businesses or an enterprise engaged in the business of processing registered and ratified by the Industrial and Commercial Administration
Department to submit your application and relevant documents to the local Customs House. Once the examination result by the Customs House is in accordance with the related laws and regulations, once you have a special factory or workshop and a special warehouse or ground, once
you have facilities for supervision and inspection of the customs, once you ensure that you'11 abide by the Customs law of P.R.C. and all regulations concerning duty-free factories drawn by the Customs and once you promise to shoulder the responsibilities which you are supposed to fulfil, the Customs House will approve and issue the Duty-Free Registration Certificate.

5. What are the standard fees for land and for leasing or purchasing factory buildings in Pudong New Area?
The Land fees for Pudong Development Zones and Towns:
Name of Enterprises Transferring Leasing
USD/M2 USD/M2/year
Lujiazui finacial and Trade Zone 550-500 --
Jinqiao Export Processing Zone 95 7.8
Zhangjiang Hi-tech Park 50-75 6
Waigaoqiao United Development Co., Ltd. 120 10
Waigaoqiao New Development Co., Ltd. 95 8
Wangaoqiao Third United Development Co., Ltd. 100 6-8
Huaxia Cultural Tourism Zone 54-82 1.3
Wangqiao Industrial Zone 50 5
Modern Agricultural Development Zone 27-36 0.2
Liuli Modern Life Park 250 --
Xinhuo Development Zone 20-25 2.2
Pudong Land Development (Holding) Company 80-300 --
Xinyuan Zhangjiang Co., Ltd. 80 6
Jingqiao Tengtian Co., Ltd. 90 8
Pufa Jinqiao Co. Ltd. 80 --
Luyang Economic Development Co., Ltd. 230-270 --
Lianyang Land Development Co., Ltd. 220-270 --
Jinyang Real Estate Co., Ltd. -- --
Jinjin Real Estate Co., Ltd. 95 7.8
Zhangqiao Town 90 5
Wanggang Town 50 4.2
Heqing Town 55 1.8
Sunqiao Town 51 3.5
Huandong Town 51 3.5
Liutuan Town 36 --
Gulu Town 45 --
Beicai Town 45 2.7
Cailu Town 30 1
Jiang Town 45 0.37
■ The Factory Building Prices for Pudong Development Zones and Towns
Purchasing Leasing
Name of Enterprises USD/M2 USD/M2/year
Luuiazui Finacial and Trade Zone -- --
Jinqiao Export Processing Zone 300-400 45
Zhangjiang Hi-tech Park -- 70
Wangaoqiao United Development Co., Ltd. 420-470 45-60
Wangaoqiao New Development Co., Ltd. 400 46-50
Wangaoqiao Third United Development Co., Ltd. 350 45
Huaxia Cultural Tourism Zone -- --
Wangqiao Industrial Zone 210-260 35-38
Modern Agricultural Development Zone -- --
Liuli Modern Life Park -- --
Xinhuo Development Zone 160 31
Pudong Land Development (Holding) Company -- --
Xinyuan Zhangjiang Co., Ltd. -- --
Jingqiao Tengtian Co., Ltd. -- --
Pufa Jinqiao Co. Ltd. -- --
Luyang Economic Development Co., Ltd. -- --
Lianyang Land Development Co., Ltd. -- --
Jinyang Real Estate Co., Ltd. 320 39
Jinjin Real Estate Co., Ltd. -- --
Zhangqiao Town 270 5
Wanggang Town 60-145 13-35
Heqing Town 145 18
Sunqiao Town 193 34
Huandong Town 193 34
Liutuan Town 120 22
Gulu Town 72-180 26
Beicai Town -- 30
Cailu Town 60 18
Jiang Town 84-170 13-18

6. What are the standard fees for electricity, gas and water in Pudong New Area? up
■ Charges For Water Supply
● Charges for water supply: RMB0.90/cubic metre for non-resident users, industrial users and hotels supplied by the water company, at the same time drainage fee is charged.
● The charge for over-rated consumption shall be levied on users ten times of its basic price.
● Charges for engineering:
1. Installation charges: from the water pipe networks of municipal roads or neighborhoods to the user's water-metre;
2. Pipe arrangement fee: water pipes involving municipal roads or neighborhoods must be implemented according to planning.
The above-mentioned water pipes, equipment and the property right belong to the water supply department.
● The user should pay maintenance fee for fire protection water systems installed in user's place.
● Charges for water disposal: RMB 0.34/cubic metre
1. Anybody that discharges waste water into the city drainage or sewage shall pay the water discharge system using fee to the water company entrusted by Shanghai City Drainage Co.; the fee for groundwater and self-provided water discharge will be levied by drainage company.
2. The volume of sewage is computed as 90% of the water usage. For enterprises that primarily rely on water or are engaged in production in which much vaporization occurs, the volume of sewage is computed by deducting the water content of the products and the degree of vaporization from the total volume of water usage. The disposal of waste shall be supervised by the Shanghai Municipal Public Works Department.
● Standard of Charges for an Increase in Water Supply
(unit: RMB yuan)
Nature of User Maximum daily use Price
Hotel, High-class Restaurant cubic metre 1300
Plants, Enterprises, Business Cubic metre 825
Organization, Non-profit Organization cubil metre 450
● The Standard Charges at Peak and Valley Point
Unit: yuan/kvh
Watt-hour peak Piont use Time Line of Business 0.4kv 10kv 35kv >110kv
08:00-11:00 Industry 0.871 0.865 0.859 0.853 18:00-21:00 Hotel 1.021 1.015 1.009
Commerce 0.901 0.895 0.889
Fee Normal 06:00-800 Industry 0.568 0.562 0.556 0.550
Piont 11:00-19:00 Hotel 0.676 0.670 0.664
21:00-22:00 Commerce 0.644 0.638 0.632
Valley 22:00-next day Industry 0.295 0.289 0.283 0.277
Point 0.6:00 Hotel 0.346 0.340 0.334
Commerce 0.306 0.300 0.294
Basic
Electricity According to Maximum quantity 18.00 18.00 18.00 18.00
Fee required (KVA/month

Charges for Coal Gas and Liquefied Petroleum Gas
1. The supply pressure of piped gas for ordinary places is 1200PA or over,
and the calorific value is 14.63-15.88 megajoule per cubic metre.
2. Users shall bear all the costs for installation from the existing gas pipe networks, but the property right belongs to the Gas Company.
3. The charge for over-rated gas consumption levied on users shall be RMB 0.6/cubic meter.
● Standard of Charges for Coal Gas and Liquefied Petroleum Gas
Unit: Yuan (RMB)
Nature of User Unit of Measurement Price
Organization cubic metre 1.30
Business, Non-profit Apr-Nar.1.20
Organization, Industry cubic metre Del-Mar.150
● Standard of charges for an increase in gas supply
Nature of user Unit of measurement for maximum daily use Price
Hothe, High-class restaurant cubic metre 800
Plants, Enterprises, Business cubic meter 450
Organization, Non-profit
Organization cubic metre 300

Item basic Monthly Rental Telephone Fee in
Operation Area
Household 24 RMB yuan 0.16 RMB yuan every
Three minutes
Institution 37 RMB yuan 0.22 RMB yuan every
Three minutes
Relay Line 111 RMB yuan 0.22 RMB yuan every
Three minutes

7. How can the land-using right be granted in development zones, industrial zones and export processing zones?
The state-owned land within development 20nes and industrial 20nes may be obtained subject to payment of consideration. Land users obtain land-using right through public bidding, and negotiation and then pay fees for the granting of land-using right. The land-using right obtained may also be transferred, leased, pawned, inherited according to the law or be used for other economic activities permitted by the law.

8. Can foreign invested enterprises in Pudong New Area be exempt from Customs duty in importing manufacturing equipment for self use?
Whether in Pudong New Area or Puxi Area, projects, which are verified by examination and approval authority and are listed in the Encouraged Industries, can enjoy the duty-free policy for their imported self-use equipment.

9. Are there any differences with regard to foreign investment policies between Pudong New Area and Minhang, Caohejing, Hongqiao Development Zones and Forward High-tech Park in Puxi Area?
Except for very few policies of Waigao Free Trade Zone in Pudong New Area, policies of all these zones are basically the same.

10. How many industrial zones are there in Shanghai? up
The following are the state level development zones: Pudong new area (including Lujiazui Finance & Trade Zone, Jinqiao Export Processing Zone, zhangjiang High-Tech Park, Waigaoqiao
Free Trade Zone, Sunqiao Modern Agriculture Development Zone), Hongqiao Economic and Technological Development zone, Caohejing High-tech Park, Minhang Economic and Technological Development Zone, Songjiang Export Processing Zone, Forward Hi-Tech Park.
Apart from above mentioned, the following are the municipal level development zones qpproved by Shanghai Municipal Government: Songjiang Industrial Zone, Jiading Industrial Zone, Qingpu Industrial Zone, Xinzhuang Industrial Zone, Shanghai all-around Industrial Development
Zone of Fengxian, Shanghai Chemical Industry Zone, Kangqiao Industrial Zone, Pudong Xinhuo Development Zone, Baoshan Industrial Zone, Jinshanzui Industrial Zone, Chongming Industrial Zone.

*Prepare to Invest in China*

If your company is ready for investing in China, You need firstly to know the China market situation and learn about the Investment Policies by Chinese government. The Chinese government has divided its industrial projects for investment into four categories classified as encouraged, permitted, restricted and prohibited. They are indicated in the Industry Category Guide for Foreign Investors. Secondly, the scale of the investment amount is also worth noting. For large investment projects of USD 30million or above, the approval authority rests on central government (State Council ministries); for projects under USD30million, in the unrestricted category or quota free, or license free, the approval authority goes to local government departments.

*Catalogue for the Guidance of Foreign Investment Industries
Catalogue of Encouraged Foreign Investment Industries
Catalogue of Restricted Foreign Investment Industries  
Catalogue of Prohibited Foreign Investment Industries   
Appendix