Shanghai Embraces Foreign Investment with Open Arms... Announces Support Measures Including Tax Cuts

Shanghai, China announced support measures including tax cuts to attract foreign investors. As economic normalization has emerged as China's top priority this year, the city hastened to emphasize its commitment to opening up following a decline in foreign direct investment (FDI) at the beginning of the year.

According to the state-run Global Times (GT) on the 4th, Hua Yuan, Vice Mayor of Shanghai, announced '20 measures' to attract foreign investment at a press conference that day. The related content was divided into four aspects: high-level opening promotion, strengthening the utilization of foreign investment attraction, enhancing support for overseas project development, and optimizing foreign investment services.

[Image source=Yonhap News]

Although specific figures or amounts were not disclosed, Vice Mayor Hua explained at the event that the city government would build a sound investment environment and protect the interests of foreign companies through improvement measures in areas such as taxation, financial services, personnel exchanges, and import-export convenience. In particular, the market will be opened to pilot projects in securities, funds, futures, life insurance companies, as well as telecommunications, digital economy, education, and health sectors. He also stated that subsidies or rewards could be granted if headquarters meet certain qualifications.

Meanwhile, GT reported that actual FDI in January and February this year increased by 6.1% year-on-year to 268.4 billion yuan (approximately 51.1382 trillion won). It also added that high-tech and service industries are receiving attention. On the other hand, according to Hong Kong's South China Morning Post (SCMP), the number of approved FDI cases during the same period sharply dropped by 22.4% year-on-year to 641 cases. Considering that Shanghai has heavily relied on multinational corporations in employment and tax revenue, the decline in foreign investment is a key factor determining the city's growth and contraction. According to SCMP, foreign companies account for 25% of Shanghai's gross domestic product (GDP), and their taxes make up one-third of the city's total tax revenue. Additionally, foreign companies are estimated to provide one out of every five jobs in Shanghai.

Since the beginning of this year, China has frequently mentioned opening up and expressed its willingness to attract foreign investment. Premier Li Chang met with business representatives at the Boao Forum for Asia held last month in Boao, Hainan Province, China, emphasizing that "investing in China is like choosing a better future." He also expressed intentions to improve market accessibility and expand a high-level free trade zone network.