A few years ago, it seemed that Shanghai was on the verge of becoming the Asian city of choice for multinationals establishing regional HQs. However, this did not come to pass and it appears that this has caught the attention of the Shanghai Municipal Government…  


By Mark Schaub, Partner, King & Wood Shanghai Office, FDI


The Shanghai authorities have recently issued Encouraging the Establishment of Regional Headquarters by Foreign Multinational Corporations Provisions. As the name indicates, these provisions are aimed at encouraging multinationals to come to the city on the Huangpu for their regional HQ. The new provisions:

  • Shorten the approval process to 10 working days (used to be 30 working days)
  • Lower minimum investment to USD 10 million (down from USD 30 million)
  • Opened up new areas of activity including domestic distribution, import/export, logistics, takeover shared services, outsourcing and most importantly, centralization of the finance management service of its enterprises in China is allowed.
  • Eases hiring non-Shanghai residents
  • Eases permanent residence for expatriates

There is also the promise of more to come with corresponding implementation regulations expected to be issued by the Municipal Foreign Economic Relations and Trade Commission. The initial provisions do address some important points such as lowering the minimum investment and broadening the scope of services but many of the new policies are not particularly attractive (i.e. quicker approval – few are so desperate; ease of permanent residence for expat – unlikely to be a core strategic concern for the multi-national). Perhaps the most important item to be addressed would be whether existing entities can be converted into regional HQs (note only investment or management companies can be regional HQs) and also reduction of tax for the high paid expats – not that they deserve it but to allow Shanghai to compete on an income tax basis with Hong Kong and Singapore. Perhaps these issues will be addressed by the forthcoming regulations.