According to Measures for the Administration of Foreign Funded Commercial Enterprises (Ministry of Commerce of the PRC, 2004, No. 8), foreign funded enterprises may engage in brokerage, wholesale, retail, and other specially authorized commercial activities. Foreign funded commercial enterprises must meet the following requirements:

(1) Minimum registered capital requirements as detailed in Corporate Law

(2) Minimum registered capital and total investment amount regulations  

(3) Term of operation of foreign funded enterprises generally does not exceed 30 years; in central and western China 40 years. Foreign funded wholesellers may not sell fertilizers, refined oil, or crude oil before Feb. 11, 2006. Foreign funded retailers may not sell fertilizer before Feb. 11, 2006. Foreign funded wholesellers may not sell salt or tobacco; foreign funded retailers may not sell tobacco.

As detailed in MOFTEC’s Circular Concerning the Establishment of Foreign Funded R & D Centers (2008, no. 218), and the Shanghai Muicipal Government's Provisional Regulations  of Shanghai Municipality on Encouraging Overseas Investment in the Establishment of Research and Development Institutions, compaies establishing R&D centers in Shanghai enjoy the following priviledges: Research equipment for company use is exempt from customs duties and accompanying value added taxes; (2) Software purchased from abroad is exempt from custom duties and value added tax; (3) Income from technology transfer, techcnology development, technical consulting, and technical services is exempt from business tax; (4) companies with R&D expenses increasing at over 10% annulally, will receive a 50% reduction of tax rates. Independently owned foreign funded companies can deduct R&D costs from pre tax income.

 

As stipulated in Interim Provisions of Shanghai Municipality on Encouraging Foreign Multinational Corporations to Establish Regional Headquarters published in 2003, regional headquarters established in Shanghai are divided into two categroeis: investment oriented companies and management oriented companies.

Companies that establish a regional headquarters qualify for the following preferential policies: (1) employee training subsidies (2) reduced personal income taxes (3) import and export management rights (4) residence permits and travel visas for foreign nationals.

The survey with the questionnaire for enterprises with foreign funds on Shanghai's investment environment, sponsored by Shanghai Foreign Investment Commission and organized by the Shanghai Association of Enterprises with Foreign Investment and the Shanghai WTO Affairs Consultation Center, aims to explore the perspectives of the Shanghai-based enterprises with foreign investment (foreign-invested enterprises) on Shanghai's investment environment. The questionnaire is composed of three parts: Part I is on respondents? Background, Part II on Shanghai's comprehensive investment environment and Part III on specific investment environment.

All field work for the anonymous survey was conducted from February to March in 2006. Approximately 800 copies of questionnaires have been handed out and 215 returned, 213 are valid. Based on the analysis of these returned valid questionnaires, the Shanghai WTO Affairs Consultation Center and the Shanghai Association of Enterprises with Foreign Funds concluded as follows:

(1) Foreign-invested enterprises expressed general satisfaction with Shanghai's investment environment and continued to deem Shanghai the most investor-friendly city in China. Asked to score on Shanghai's comprehensive investment environment for enterprises with foreign funds, roughly nine in ten marked more than 70 (100 marks), including 70% marking more than 80. Up to 90% (virtually 89.7%) of the respondents favored Shanghai as their best choice of investment destination in comparison with other mainland cities.

(2) Respondents also expressed great satisfaction with Shanghai's implementation, over the past five years, of China's WTO commitments, with two thirds of them scoring more than 80 and altogether 87.3% marking more than 70.

(3) In addition to their positive comments on Shanghai's comprehensive environment, Foreign-invested enterprises surveyed were also optimistic about the improvement of the investment environment in Shanghai, which are reflected in the following three aspects: Firstly, close to 95% respondents felt confident about the improvement of Shanghai's investment environment; Secondly, Shanghai's popularity can be revealed by the fact that more than 70% respondents have either established or plan to establish their regional headquarters in Shanghai; Last but not least, more than seven-in-ten of the companies are going to increase their investment in Shanghai in the next three years.

(4) Foreign-invested enterprises attributed Shanghai's international competitiveness as a land for investment to its sound urban infrastructure and qualified labor. On the other hand, problems adversely affecting Shanghai's competitiveness, according to the respondents, included its high business costs and incompleteness in its legal system and lack of transparency.

(5) It was believed that both Shanghai's priority given to the development of modern service industry and Shanghai's hosting of the 2010 World Expo would have positive impact on foreign investment in Shanghai. 62% respondents believed that Shanghai's priority given to the development of modern service industry would have very positive or substantial impact on Shanghai as a land for investment, and even more respondents, up to three quarters agreed that Shanghai's host of the 2010 World Expo would have "very positive"or "positive"impact on Shanghai's foreign investment.

(6) 80% to 90% foreign enterprises surveyed believed that relative policies regarding Pudong's being a pilot base of overall concomitant reform on foreign investment in Shanghai and the construction of Yangshan Deepwater Port would greatly influence Shanghai's investment environment and promote the foreign investment in Shanghai.

(7) According to the foreign-invested enterprises, what have attracted them most to invest in Shanghai can be cited as preferential policies, business opportunities, including extensive links with the international market, as well as free competition.

(8) Energy and power and transportation were deemed as the top two factors that would severely constrain Shanghai's development as a land for investment.

(9) On government policies and institutions concerning foreign investment, although foreign investors surveyed expressed general satisfaction with services provided by the administrative departments, there continued to be complaints about "government efficiency, policy transparency and government administrative system? Reform and improvement on government efficiency have been highly expected.

(10) General positive comments were given by foreign-invested enterprises on the protection of intellectual property rights in Shanghai, with 87.3% respondents agreed that the situation had been improved