Shanghai in bid to lure foreign investors
One of the country’s biggest economic locomotives is gearing up to roll out an action plan that it hopes will fuel foreign investment in research and development, in its latest bid to lure back businesspeople and grow as a global hub for innovation.
The promises coming out of Shanghai include better facilitating cross-border data flows and doing more to protect intellectual property rights, which remain among the major concerns of foreign companies operating in the country.
The plan, which takes effect tomorrow after being announced earlier this month, intends to “lift the confidence of foreign investors in Shanghai”, following a series of related directives from the central government over the past year.
That confidence took a hit in Shanghai following two months of Covid-19 lockdowns in 2022, as well as last year’s anti-spying law and raids on foreign firms.
In addition to pledging financial incentives and streamlined filing procedures, the plan would “help push for deeper integration of local innovative companies and foreign-funded research centres”, the city government said in an interpretation of the new policy directive on its website.
The financial and commercial hub missed its economic growth target of 5.5 per cent last year, reporting a 5 per cent increase in gross domestic product (GDP) amid a slump in exports and weak domestic demand.
Authorities will categorise data exporting from Shanghai in its free-trade zone and review only those deemed necessary for security reasons, according to the plan, with a detailed list yet to be rolled out.
It vowed to also improve coordination with other provinces and municipalities to toughen the crackdown on the infringement of intellectual property rights of foreign-invested research centres. Drawing foreign direct investments and improving the business environment have been high on Shanghai’s postpandemic agenda to reinforce its ambitions of becoming a global financial centre and technological innovation hub.
But foreign businesses have said they want fewer promises and more action.
Eric Zheng, president of the American Chamber of Commerce in Shanghai, said that data localisation and other cybersecurity requirements, as well as intellectual property protections, were among the top concerns of chamber members.
“Companies need a transparent process for cross-border data cybersecurity assessments, and they also need enforcement of IP laws,” he said. “We look forward to more details regarding the plan and its implementation.”
Maximilian Butek, executive director of the German Chamber of Commerce in China (Shanghai), said Shanghai was a prime choice for setting up research and development centres to serve the domestic market, thanks to its “top-notch infrastructure and local talents”.
“However, for German companies to use Shanghai as a global R&D hub, simplifying international data transfers and removing internet-access barriers are necessary,” he said. “So far, the plan does not seem to go far enough to address these needs.”
Shanghai has been struggling to maintain its allure as a regional hub for multinational companies amid their de-risking efforts that have come in response to perceived challenges from a tightening of anti-espionage rules and regulations targeting cross-border data transfers.
Strict regulations on crossborder data transfers, proposed last year by the Cyberspace Administration of China, have led to delays in the approval process for cross-border data flows while fuelling concerns among multinational companies that regularly transfer data outside the country.
“Shanghai’s plan to attract foreign investment is another positive step as China seeks to rebuild trust and attract foreign investment after years of waning business confidence among our membership,” the British Chamber of Commerce in China said in a statement.
Issues that Shanghai had vowed to tackle were among the most common complaints that their members had raised, it said, adding that they hoped to see action on these issues at the national level.
In his government work report last week, Premier Li Qiang vowed to address issues surrounding cross-border data flows, among measures to lure more capital from overseas.