Firms see new Shanghai welcome mat

After four decades in China, French industrial group TLD has set up its regional headquarters in Shanghai, thanks to a friendly business environment that is especially favorable for high-tech companies, said Thomas Dorn, the company's CEO for Asia.

Shanghai was the perfect choice for the move, made last month, because of the city's easy transportation connections to other parts of the Asia-Pacific region, the size of the Chinese market and the sufficient supply of manufacturing talent in the city, Dorn said.

"Companies are not always given the opportunity to express their opinions and receive government response accordingly" in other markets, he said.

"But this is totally possible in Shanghai," which is one of the city's key advantages, Dorn added.

TLD is one of many companies that set up regional headquarters this year in Shanghai. During the first seven months of the year, 26 multinational companies have established regional headquarters in the city, and nine other multinational companies established regional research and development centers there.

But Shanghai considers that far from enough, so the municipal government introduced, at the end of July, a guideline to facilitate the development of multinational corporations' regional headquarters in the city.

The guideline, which took effect on Sunday, is made up of 30 detailed policies that cover the areas of establishment of regional headquarters, investment, use of capital, trade and logistics, research and development, and other supporting policies.

Much effort will be given to facilitating the use of capital for multinational companies, with 13 policies introduced in this area.

For Pan Lyumin, president of Huntsman Corp's polyurethane business in the Asia-Pacific, policies regarding multinational companies' capital pool management in Shanghai are the highlight of the new guideline.

Huntsman's total investment in China has amounted to 15 billion yuan ($2.1 billion) so far, Pan said. It has set up subsidiaries in Nanjing, Guangzhou and Tianjin, and if each subsidiary manages its financing and profit and transfers its capital overseas, this would be a huge burden in terms of cost.

"As one of the first multinational polyurethane providers to enter China in 1992, Huntsman has invested in various plants in China," he said. "Before the new policies, we had to transfer all the plants' capital overseas and then reallocate the money to the Chinese plants from overseas. This incurred unnecessary trouble and tax."

With the newly introduced policies, Huntsman can manage the money via a holding company or the regional headquarters in Shanghai. Capital can thus be allocated freely among different subsidiaries, a flexibility that will largely benefit the company's operations, said Pan.

In addition, multinational companies' regional headquarters with good credit records will be eligible for favorable offshore trade policies. These companies will be able to carry out switch trades for commodities via their free trade accounts. Switch trading involves companies in three countries, with one being in the production country, another in the consumption country, and a third acting as intermediary. Banks can thus provide cross-border financial services based on international rules, according to the guideline.

Yang Chao, director of the Shanghai Commission of Commerce, said a large part of the multinational companies' business in China would include trade among three companies, which will incur switch trade. In this sense, supervision concerning the flow of commodities, documents and capital should be integrated.

"Switch trade will pose more challenges to supervision. But it will improve Shanghai's capability, enhance its competitiveness, and attract high-level resources from all over the world. This will result in fundamental change in the city," he said.

Multinational companies that set up regional headquarters in Shanghai will be allowed to apply for a single business permit for multiple chain operations in the city. Previously, each chain operation had to apply for its own business license, but now companies only need to file the location of their chain operations.

"Multinational companies will save much time in applying for business licenses," said Peng Wenhao, deputy head of the Shanghai Market Supervision and Administration Bureau. "With the new policy, they will be able to expand in Shanghai at a much faster pace."

Germany's largest supermarket chain, Aldi, first reached the Chinese market in 2017 by setting up its flagship store at Alibaba's Tmall platform. Chen Yougang, president of Aldi China, said the company has already submitted its plan for setting up the company's China headquarters in Shanghai. With regard to the new policies, he said Aldi will benefit most from the favorable license application policy.

"Before this policy was introduced, we needed to apply for 100 business licenses if we planned to set up 100 chain stores in the city. But now we only need one business license, and the remaining 99 stores only require location records, which can largely reduce our workload. Based on this new policy, we will open more stores in Shanghai," he said.

Shanghai rolled out the first group of favorable policies to attract regional headquarters in 2002. By the end of July, Shanghai had attracted 696 regional headquarters and 450 regional R&D centers.