Shanghai Fengpu Industrial Park
Export Processing Zone

14. Shanghai’s Investment Environment for Enterprises with Foreign Investment

14.2.3 On Shanghai’s specific investment environment

(1) On the impact of Pudong being a pilot base of Comprehensive reform on foreign investment in Shanghai.

Relevant policies regarding Pudong being a pilot base of overall concomitant reform were believed to have “very substantial” impact on Shanghai’s foreign investment by 8.9% respondents. Yet 31.9% surveyed believed the impact would be “substantial”, 42.3% expected there would be “some” impact and 5.6% took it “moderate”. There were 4.2% respondents who expected “no change” and still 7.0% had skipped this question (see Chart 14-17).

(2) On the impact of the construction of Yangshan Deepwater Port on the improvement of

Shanghai’s investment environment. 18.8% respondents regarded the impact of the construction of Yangshan Deepwater Port on the improvement of Shanghai’s investment environment as “very substantial”, 37.6% “substantial”, 33.3% “some” and 7.5% “moderate”. But 1.4% predicted it would make no change and another 1.4% skipped this question (see Chart 14-18).

(3) On the impact of the establishment of Yangshan Bonded Port Area on Shanghai’s investment environment

14.1% respondents agreed that the establishment of Yangshan Bonded Port Area would have “very substantial” impact on Shanghai’s investment environment. 39.9% regarded the impact as “substantial”. Those deeming there would be “some” impact took up 37.1% and 2.3% saw no change. 1.4% expressed their own views or skipped this question (See Chart 14-19).

(4) On the impact of Shanghai’s hosting of the 2010 World Expo on foreign investment

30.0% respondents predicted that Shanghai’s hosting of the 2010 World Expo would have “very positive” impact on its foreign investment. Together with 45.1% deeming the impact to be positive, a total of three quarters of respondents regarded the impact as positive. In addition, 18.8% thought the impact would be “moderate” and still 5.2% expected no change at all. However, none had selected “negative” (See Chart 14-20).

(5) On the most ideal service sector for foreign investors

If Shanghai were to remove all the restraints on the service sector, 32.4% of the respondents would like to invest in Distribution. 21.1% selected Logistics, 15.0% preferred Finance, 10.3% “Conference and exhibition, tourism” and 9.4% “Telecommunication service” (See Chart 14-21). In addition, as most of the respondents surveyed came from manufacturing industry (See Chart 14-2), up to 17.4% had selected “other” (often no comments were made and a few answered either “have no idea” or wrote down other sectors).

(6) On expanding investment through acquisition of Chinese enterprises

56.3% respondents generally had yet got no plan to expand their business by acquisition of Chinese enterprises while 8.5% had already done the acquisition. Among the remaining ones, 0.5%, 15.5% and 17.4% respondents selected “under operation”, “under consideration” and “we might do so in near future” respectively, making up totally one third of all. The answer suggested that for foreign enterprises, acquisition of Chinese enterprises had not yet been considered as a major means for expansion. (See Chart 14-22).

(7) On their acquiring for distribution rights

As respondents were allowed to skip this question if they had not been familiar with distribution rights, only 98 out of 213 questionnaires received had answered this question. Among these 98 respondents, 10.2% believed that “the issue of distribution rights had already been solved”, 9.2% selected “this is an issue principally decided by the central government”, 13.3% answered “Shanghai is doing well in the examination and approval process” and furthermore 17.3% thought “Shanghai still has a long way to go on the examination and approval process”. However 46.9% respondents had not yet been familiar with Shanghai’s local examination and approval process. (See Chart 14-23)

On Shanghai’s IPR protection, the comments were generally positive. Totally 87.3% believed the situation had been improved, with 2.8% regarding the improvement as “substantial” and 26.8%

thought “it has been improved quite a lot”. 57.7% answered “to some extent” it had been improved while 9.9% had seen no change. Only 0.5% chose “it has been worsened” (See Chart 14-24).

Power supply had been considered regular by 21.1% respondents. 31.5% respondents regarded the impact of power shortage as slight while 28.2% “quite a lot” and 15.0% “substantial”. Furthermore, power shortage was believed to be a problem that could never be avoided by 3.3% respondents (See Chart 14-25).

More than one third (34.7%) respondents deemed the internet service to be generally regular. 12.7% commented that “problems existed before but have been solved already”. 31.9% believed “problems exist with moderate impact” and only 7.5% thought the impact would be substantial. In addition, 10.3% understood it had not been a problem unique to Shanghai (See Chart 14-26).

Transportation was the biggest concern (by 74.2% respondents), followed by health care (53.1%), living environment (46.5%), children's education (34.3%) and formalities to obtain the visa (16.4%) (See Chart 14-27).

Approximately half of the respondents believed that foreign-invested enterprises should be more actively engaged in social service or ecological and environmental protection (with 51.6% and 48.8% respondents respectively). In addition to this, 39.0% respondents thought protection of labor rights should be improved. And still we got 13.6% respondents seeing “no problems seem to exist. “(See Chart 14-28)

36.6% respondents answered preferential policies should be the most important factor in attracting foreign investment while 35.2% emphasized on business opportunities, which indicated that both factors had been believed to be equally important to them. In addition, those favoring government efficiency, perfection of laws and regulations and business cost accounted for 27.7%, 26.8% and 22.1% respectively (See Chart 14-29).

The result showed that the foreign-invested enterprises were most satisfied with the government services provided by administrative departments in charge of investment, with 55.4% of them selecting this option. In addition, 11.7% favored “administration according to the law”, 10.8% “efficient customs clearance”, 9.9% “taxation environment”, 8.0% “policy transparency” and 10.3% described other services (See Chart 14-30).

Close to six-in-ten deemed that Shanghai's labor force could be featured by “smart and competent”. More than four-in-ten regarded Shanghai’s labor force as “willing to compete”, 38. 5% chose “diligence” and those favoring “sense of honesty” and “teamwork spirit” accounted for 16.4% and 12.7% respectively (See Chart 14-31).

On market service, most of the foreign investors surveyed enjoyed Shanghai’s extensive links with the international market, with two thirds of respondents selecting this option. Those favoring “free competition” and “abundant human resources” each accounted for more than one third of all respondents, to be exact, 36.6% and 34.3% respectively. In addition, 21.6% and 15.0% preferred “technology innovation and application” and “efficient logistics” respectively (See Chart 14-32).

51.2% respondents believed energy and power would constrain Shanghai’s investment environment most severely. 46.5% chose “transportation”, followed by 37.1% selecting “lack of senior managers”, 30.5% “housing price” and 15.0% “living environment” (See Chart 14-33).

According to the respondents, Shanghai’s rent was considered to be too high (by 54.0%). Land price was selected by 44.1%. 38.0% respondents chose “labor cost”, while 17.8% and 14.6% selected “administrative fees” and “transportation fees” respectively (See Chart 14-34).

Most respondents believed that Shanghai should “continue providing preferential policies to enterprises investing in encouraged industries” and “shorten the time for administrative approval and reduce the administrative permission procedures”, with supporters of 59.6% and 59.2 respectively. Also more than half (55.9%) believed that Shanghai should lower tax rate and reduce various charges. In addition, close to half (47.9%) deemed that customs, entry-exit inspection and quarantine procedures should be simplified. Those expecting financing channels being expanded accounted for 28.2% of all. This result manifested that in the viewpoint of these foreign-invested enterprises, preferential policies and the reform of administrative management (including reducing procedures, improving government efficiency and simplifying customs procedures) were of equal importance (See Chart 14-35).