Highrises dominate the skyline on both sides of the Huangpu River in Shanghai. Gao Erqiang/china Daily
Inclusion of Lingang in FTZ is latest example of opening-up
Editor's note: As the People's Republic of China prepares to celebrate its 70th anniversary on Oct 1, China Daily is featuring a series of stories on the role regions have played in the country's development and where they are today.
Lingang, in the southeast of Shanghai, was officially included in the China (Shanghai) Pilot Free Trade Zone on Tuesday, marking another major effort by the city to advance China's new round of opening-up, which is being carried out at a higher level and more extensively.
Chen Jie, deputy director of Lingang's administrative committee, said it had received many inquiries from foreign consulates in Shanghai and foreign companies since Lingang's framework development plan was released by the State Council early this month.
He said initiatives including a favorable 15 percent income tax rate for companies specializing in high-end manufacturing industries such as integrated circuits, easy access to data, free flow of capital and relaxed employment policies would help Lingang attract foreign investment.
Lingang is home to Tesla's gigafactory, the first of its kind outside the United States and Shanghai's largest foreign manufacturing project by value, with total investment to reach 50 billion yuan ($7.08 billion).
Tao Lin, global vice-president of Tesla, said the gigafactory will bring the most advanced technologies and innovative business models China, adding that constant support from the Chinese government "has helped Tesla to make its dream come true".
Including Lingang in the Shanghai FTZ is among a number of moves Shanghai has made recently to further embrace foreign investment. Statistics from the Shanghai Municipal Commission of Commerce show the city attracted foreign contracts worth $22.9 billion in the first half of this year, up 6.3 percent year-on-year.
By the end of June, $9.8 billion of the contract capital was in place, up 13.9 percent year-on-year.
In the first six months of the year, 3,247 new foreign-invested projects were established in Shanghai, up 49.2 percent year-on-year, with the commission saying technology-focused service providers had seen the biggest growth.
"The strong numbers recorded during the first half of 2019 show that foreign companies are accelerating their exploration of China by taking Shanghai as the center of all deployment," said Yang Chao, the commission's deputy director.
Data from the Shanghai Bureau of Statistics show the city has attracted $240 billion in foreign investment since reform and opening-up started four decades ago.
Shanghai Mayor Ying Yong said opening-up was the city's strongest competitive edge, and the strategy would be carried on.
"Shanghai will make continued efforts to facilitate investment and trade, which in turn promote economic globalization," he said.
"We have always embraced more international companies and capital to build a more open economic system and will continue to do so," he added.
Against that backdrop, the municipal government rolled out 30 policies late last month to encourage more multinational companies to set up their regional headquarters in Shanghai.
Over the past two decades, Swiss pharmaceutical giant Roche became the first multinational pharmaceutical company to build a full value chain in China, from research and development and manufacturing to sales.
A decade ago, it became the first foreign-invested company to establish its China headquarters in the Zhangjiang Hi-Tech Park, in Shanghai's Pudong district.
The medicines it produces in Shanghai supply the Chinese market and are exported to Europe and North America.
Hong Chow, CEO of Roche Pharmaceuticals China, said Shanghai had been "a pioneer throughout China's reform and opening-up endeavor".
"The municipal government has built up a favorable business environment which is one of the most important factors for multinational companies like Roche to thrive," she said. "Shanghai's open, diverse and inclusive metropolitan culture is also attracting high-end talent from all over the world to contribute to the city's social and economic development."
The company expects the 863 million yuan Roche Innovation Center Shanghai to be completed in October. It will be Roche's third-largest strategic center globally, and will focus on drug discovery in infection-and immunology-related diseases.
"We are excited to continue our strong commitment and contribution to help Shanghai evolve into a world-class innovation hub," Chow said.
Shanghai rolled out the first batch of favorable policies to attract multinational companies' regional headquarters 17 years ago, and in the first seven months of this year, 26 set up regional headquarters in the city and nine others established regional R& D centers.
By the end of July, Shanghai had attracted 696 regional headquarters and 450 regional R &D centers.
Andrew Choy, EY's China international tax leader, said most of the multinational companies entering China in the 1980s and 1990s specialized in processing trade. But more service companies had come into the Chinese market since 2000.
Based on his experiences helping North and South American companies enter China, he said four out of five service-focused multinational companies would choose Shanghai as their regional headquarters.
But some multinational technology companies were asset-light and could not meet the municipal government's asset requirement for setting up a regional headquarters in Shanghai. That threshold had recently been lowered, in line with the path of industrial development globally, Choy said.
"More freedom is provided to multinational companies' regional headquarters in Shanghai and they can thus give full play to their capacity here," he said.