Shanghai releases 20 new measures to encourage reinvestment in domestic market

Shanghai's continued efforts to improve its business environment will further consolidate its appeal to multinational companies, facilitating the city's high-quality economic growth, officials and experts said.

Their comments were made after the Shanghai municipal government released a set of 20 new measures to encourage foreign-invested companies to make reinvestment in the domestic market on Tuesday.

Foreign-invested enterprises legally established in China are encouraged to reinvest undistributed profits. Overseas investors are encouraged to make the same moves by using their legally obtained profits in the onshore market — whether they are denominated in domestic or foreign currencies. Reinvestment methods include investing in newly established enterprises registered in Shanghai — increasing capital in existing companies, acquiring shares, equities, and property interests, as well as investing in projects, according to the public circular.

As explained by Huang Feng, director of the Shanghai Foreign Investment Association, multinational companies have accumulated considerable retained earnings after years of operation in China. These earnings are mainly used in three ways: daily operation, reinvestment, and direct distribution to shareholders.

Shanghai's new measures are projected to direct these retained earnings to industries and encourage foreign-invested companies to further expand their footprints in China, he said.

According to officials from Shanghai Municipal Development & Reform Commission, the new measures have streamlined the areas of key concern to multinational companies, including tax, the registration and use of foreign exchange, the allocation of land resources, a simplified process for transferring medical device production, coordination of multi-warehouses for pharmaceutical wholesale, among others.

While Shanghai is home to nearly 80,000 foreign-invested companies and accommodates the regional headquarters of over 1,000 multinational companies, a large number of them have used their undistributed profits obtained here for setting up new production lines, technology upgrading and transformation, and building new research centers, according to Shanghai Municipal Development & Reform Commission officials.

According to the proposal for the 15th Five-Year Plan (2026-30) period released in October, foreign companies' reinvestment in China will serve as a major catalyst in advancing the country's high-level opening-up. The National Development and Reform Commission, the country's economic planner, released a circular to facilitate foreign companies' reinvestment in July, providing flexible long-term leases for industrial land, shortening the registration time for newly registered companies, and favorable foreign exchange policies, among other policies.

The introduction of the 20 new measures in Shanghai is a response to the latest edition of the business environment improvement action plan released by the municipal government on Monday, according to Huang,

The action plan — which was updated to the 9.0 version this year after being originally rolled in 2017 — said that efforts will be made to secure the execution of foreign-invested projects, including reinvestment projects and the existing ones. These substantial measures have been praised by companies, Huang said.

Yang Hongwei, chief researcher of Shanghai Zhongchuang Institute for Industry & Innovation, said that the latest action plan has directed the focus from bettering services provided to companies to creating a more favorable industrial ecosystem in general. This is in line with the changes undergoing in Shanghai's industrial landscape.

According to Chen Yanfeng, deputy director of Shanghai Municipal Development & Reform Commission, Shanghai has rolled out more than 1,300 measures in the previous editions of the action plan to address the problems most encountered and raised by foreign companies.

This year's action plan will make the optimized measures more inclusive and fairer. In this way, Shanghai can better prepare for the beginning of the 15th Five-Year Plan period and seek even bigger gains in its development, he said.