Welcome to our comprehensive guide on why starting a company in Shanghai is the right decision for entrepreneurs and investors alike. In this article, we’ll delve into Shanghai’s dynamic financial landscape, abundant investment prospects, strategic geographical advantages, and its role as China’s economic powerhouse. Whether you’re a seasoned business owner or a budding entrepreneur, you’ll find compelling reasons to make Shanghai the home for your next business venture. Read on to discover the myriad opportunities that await you in this bustling metropolis.
Shanghai (上海) stands as a shining beacon of China’s (中国) economic prowess, serving as one of the four directly-administered municipalities in the People’s Republic of China (PRC). Strategically located at the southern mouth of the Yangtze River, the city is bisected by the Huangpu River (黄浦江). As of 2021, the city’s population reached an impressive 24.89 million, making it the third most populous city globally. The urban expanse is the most densely populated in China, housing 39.3 million residents.
Originally a humble fishing village, Shanghai’s (上海) transformation into a global financial and trading hub is nothing short of remarkable. The city’s historical significance dates back to the 19th century when it became one of the five treaty ports opened to European trade following the First Opium War. The establishment of the Shanghai International Settlement and the French Concession accelerated its growth, making it Asia’s commercial and financial epicenter by the 1930s. Although its global influence waned after the Second Sino-Japanese War and the Communist takeover in 1949, economic reforms in the 1990s revitalized the city, particularly the Pudong New Area (浦东新区).
For foreign investors, Shanghai (上海) presents unparalleled opportunities. As of 2018, the city’s gross metropolitan product was a staggering 9.1 trillion RMB ($1.33 trillion), and it’s home to the Shanghai Stock Exchange (上海证券交易所), one of the world’s largest by market capitalization. The city also hosts the pioneering Shanghai Free-Trade Zone (上海自贸区), the first of its kind in mainland China. Classified as an Alpha+ city by the Globalization and World Cities Research Network, Shanghai is the headquarters for 12 Fortune Global 500 companies and ranks 4th on the Global Financial Centres Index as of 2022.
The city is not just a financial powerhouse but also a hub for research and development, boasting numerous top-tier Double First-Class Universities. The Shanghai Metro (上海地铁), inaugurated in 1993, holds the record for the world’s largest metro network by route length, further enhancing the city’s appeal for foreign investment.
Culturally, Shanghai (上海) is a melting pot, offering a blend of architectural styles like Art Deco and shikumen, and landmarks such as the City God Temple (城隍庙), Yu Garden (豫园), and the iconic Bund (外滩) area. The city’s unique cuisine, local dialect, and international vibrancy add to its allure.
Shanghai (上海) is often hailed as China’s (中国) economic crown jewel, serving as a global nexus for finance, innovation, commerce, and trade. The city boasts the world’s busiest container port—Port of Shanghai (上海港)—and stands as a testament to China’s meteoric economic rise. As of 2018, the Greater Shanghai metropolitan area, encompassing cities like Suzhou (苏州), Wuxi (无锡), and Nantong (南通), generated a staggering gross metropolitan product of 9.1 trillion RMB ($1.33 trillion nominal or $2.08 trillion in PPP), outpacing entire countries like Mexico.
For foreign investors, the city offers an economic landscape that is both diverse and robust. Shanghai’s six primary industries—retail, finance, IT, real estate, machine manufacturing, and automotive manufacturing—account for nearly half of the city’s GDP. As of 2021, the city’s GDP stood at CN¥4.46 trillion ($1.106 trillion in PPP), contributing 3.69% to China’s overall GDP. The city also ranks as one of the wealthiest in China, with an average annual disposable income of CN¥78,027 (US$12,287) per capita.
Shanghai’s (上海) financial prowess is globally recognized. The city ranks first in Asia & Oceania and third worldwide, trailing only New York and London, according to the 28th edition of the Global Financial Centres Index published in September 2020. The Shanghai Stock Exchange (上海证券交易所) is the largest in China and the fourth-largest globally, with a market capitalization of US$4.02 trillion as of 2019.
The city is also a hotbed for technological innovation and startups. In 2021, it was ranked as the world’s second Fintech powerhouse, right behind New York City. Shanghai is home to 1,491 financial institutions, including 251 foreign-invested entities, making it an attractive destination for foreign direct investment.
One of the city’s most significant milestones was the launch of the China (Shanghai) Pilot Free-Trade Zone (中国（上海）自由贸易试验区) in September 2013. This was mainland China’s first free-trade zone, aimed at attracting foreign investment through a series of pilot reforms. By April 2014, Shanghai had already attracted the highest volumes of financial sector foreign direct investment in the Asia-Pacific region.
In terms of future prospects, Shanghai’s nominal GDP is projected to reach a staggering US$1.3 trillion by 2035, placing it among the world’s top 5 major cities in terms of Gross Regional Product (GRP). As of August 2022, the city ranked 5th globally and 2nd in China (after Beijing) in terms of hosting the largest number of Fortune Global 500 companies.
Shanghai’s (上海) historical and rapid development, particularly since the 1990s, underscores its status as one of the world’s fastest-growing cities. It has consistently recorded double-digit GDP growth almost every year between 1992 and 2008, prior to the 2007-08 financial crisis.
As a crucial industrial center in China (中国), Shanghai (上海) serves as a linchpin for the nation’s manufacturing and heavy industry sectors. The city is home to several vital industrial zones that are the backbone of its secondary sector, including the Shanghai Hongqiao Economic and Technological Development Zone (上海虹桥经济技术开发区), Jinqiao Export Economic Processing Zone (金桥出口加工区), Minhang Economic and Technological Development Zone (闵行经济技术开发区), and the Shanghai Caohejing High-Tech Development Zone (上海漕河泾高新技术开发区). Shanghai is the base for Baosteel Group (宝钢集团), China’s leading steel manufacturer, as well as Hudong-Zhonghua Shipbuilding Group (沪东中华造船集团), the country’s top shipbuilding base. It also hosts Jiangnan Shipyard (江南造船厂), one of China’s most venerable shipbuilders. The automotive sector is another key industry, with Shanghai-based SAIC Motor (上汽集团) ranking as one of China’s top three automotive corporations. SAIC Motor has strategic alliances with global industry frontrunners like Volkswagen (大众) and General Motors (通用汽车).
Shanghai (上海) is the location of the China (Shanghai) Pilot Free-Trade Zone (中国（上海）自由贸易试验区), the inaugural free-trade zone on mainland China. As of October 2019, it ranks as the second-largest free-trade zone in mainland China by land area, trailing only the Hainan Free Trade Zone (海南自由贸易区), which encompasses the entire Hainan province. The Shanghai Free-Trade Zone spans 240.22 km2 (92.75 sq mi) and amalgamates four pre-existing bonded zones: Waigaoqiao Free Trade Zone (外高桥保税区), Waigaoqiao Free Trade Logistics Park (外高桥保税物流园区), Yangshan Free Trade Port Area (洋山保税港区), and Pudong Airport Comprehensive Free Trade Zone (浦东机场综合保税区). To lure foreign investment into various sectors, the zone offers several preferential policies. Additionally, because the zone is not considered part of Chinese territory for tax reasons, goods entering the area are not subject to customs duties or clearance procedures.
Shanghai (上海) serves as a major air transport hub in Asia, boasting two commercial airports: Shanghai Pudong International Airport (上海浦东国际机场) and Shanghai Hongqiao International Airport (上海虹桥国际机场). Pudong International Airport is the primary gateway for international flights, while Hongqiao International Airport mainly caters to domestic and some short-haul international routes. In 2018, Pudong International Airport accommodated 74.0 million passengers and processed 3.8 million tons of cargo, ranking it the ninth-busiest airport by passenger traffic and third-busiest by cargo volume. In the same year, Hongqiao International Airport served 43.6 million passengers, making it the 19th-busiest airport in terms of passenger volume.
The Port of Shanghai (上海港) has quickly ascended to become China’s largest port. Yangshan Port (洋山港) was constructed in 2005 to accommodate large container ships that couldn’t dock in the river. The port is linked to the mainland via the 32-kilometer (20-mile) Donghai Bridge (东海大桥). Although managed by the Shanghai International Port Group under the Shanghai government, it is administratively part of Shengsi County (嵊泗县), Zhejiang (浙江).
Surpassing the Port of Singapore in 2010, the Port of Shanghai is now the world’s busiest container port, with an annual TEU throughput of 42 million in 2018. In addition to cargo, the port facilitated 259 cruises and 1.89 million passengers in 2019.
Shanghai is also a key node in the 21st Century Maritime Silk Road (21世纪海上丝绸之路), which extends from the Chinese coast southward via the southern tip of India to Mombasa, then to the Mediterranean, and finally to the Upper Adriatic region, terminating at the northern Italian hub of Trieste, which offers rail connections to Central and Eastern Europe.
In summary, Shanghai (上海) stands as both China’s (中国) economic showpiece and a global hub for finance and innovation. With its robust financial infrastructure, strategic location, and diverse economic landscape, the city offers an unparalleled opportunity for foreign investors. Shanghai’s strategic initiatives to attract foreign investment, along with its ambitious future projections, make it an irresistible destination for those looking to tap into the booming Chinese market and capitalize on global financial and innovation trends. Whether you’re drawn by its cultural richness or its robust financial ecosystem, investing in Shanghai is an opportunity that’s hard to overlook.
JR & Firm LLC: Your Trusted Partner for Corporate Services in China
Navigating the business landscape in China can be challenging, but JR & Firm LLC is here to simplify the process for you. With over 15 years of experience in corporate consultancy, we specialize in a range of services tailored to meet your business needs. Whether you’re looking to form a company, draft contracts, structure your organization, or set up offshore accounts, we’ve got you covered.
Our Services in China Include:
- Company Formation: From selecting the right business structure to handling all the legal formalities, we make the process of setting up a company in China seamless and hassle-free.
- Contract Drafting: Our team of legal experts will draft contracts that are not only compliant with Chinese laws but also protect your interests.
- Company Structuring: We help you design an efficient organizational structure that aligns with your business goals and complies with local regulations.
- Offshore Accounts and Company Formation Globally: Looking to expand beyond China? We can assist you in setting up offshore accounts and forming companies worldwide.
- Consultancy Services: Benefit from our in-depth market insights and strategic advice to make informed business decisions.
For more information on how JR & Firm LLC can assist you in China, feel free to reach out to us at:
Trust JR & Firm LLC to be your reliable partner in China, offering comprehensive solutions for all your corporate needs.
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1. What is the first step if I want to register a WFOE?
The first step towards registering a WFOE in China involves contacting a professional consultancy firm, such as JR & Firm, and signing a service agreement. In theory, the founders could handle the process themselves. However, since it requires an in-depth understanding of the company registration system and proficiency in Mandarin Chinese, it is generally more practical to hire a professional company to prevent potential mistakes during the process.
2. I have signed a service agreement with JR & Firm to register my WFOE, what's next?
After signing an agreement with our clients for WFOE registration in China, we issue a formal invoice. At this stage, we anticipate that our clients will make a payment for the service, allowing us to commence the process.
3. I have paid JR & Firm for the WFOE registration service, what should I do next?
Upon receiving full payment for the WFOE registration, we provide our clients with a detailed questionnaire. This document requests all the necessary information about the company, business activity, founders (shareholders), and executives (including the company director and supervisor). We request that our clients complete the questionnaire and return it to us via email.
4. What should I prepare for the WFOE registration questionnaire?
1. Company Name Choices: In China, WFOE names should follow this structure: [Place of Registration] + [Chosen Name] + [Business Direction] + Co., LTD. For example, Shanghai Silk Road International Trading Co., LTD, or for a consultancy company: Shanghai Silk Road Consulting Co., LTD. An alternative structure is: [Chosen Name] + [(Place of Registration)] + [Business Direction] + Co., LTD. For example: Silk Road (Shanghai) International Trading Co., LTD. Please note, in China, a company’s Chinese name is considered its main name. If our clients know Chinese, we ask for name choices in both Chinese and English, following the above structure. If not, English name choices will suffice, and we will select a corresponding Chinese name based on similar sounds. Avoid city, country, and historical names, as they’re typically disallowed. Also, we discourage direct translations of the English name due to high likelihood of them being taken. We recommend selecting similar-sounding Chinese characters to avoid delays. The Chinese name does not need to have a specific meaning, as meaningful characters are often taken.
2. Company’s Legal Person (Company Director): The legal person is an individual and cannot be a corporate entity. Please prepare their full name (as on the passport), a copy of their passport (not ID), along with their address, phone number, and email address.
3. Company’s Supervisor: The company supervisor is a separate individual from the company director, meaning they cannot be the same person. Please provide their full name (as on the passport), a copy of their passport (not ID), and their address, phone number, and email address.
4. Company’s Shareholder(s): Shareholders are the owners of the company and can be both individuals or corporate entities. Both the company director and supervisor can be shareholders. There can be up to 50 shareholders. Whether an individual or corporate shareholder, full information is required: full names, contact details, address, and either passport copies (for individual shareholders) or a full set of company documents (for corporate shareholders).
5. Company’s Business Activity: What products and/or services does the company plan to sell? Please prepare a detailed list.
6. Company’s Registered Capital: The registered capital is the amount the founders plan to invest in the company over a span of 30 years or more. The amount varies depending on the activity and place of registration. We recommend $300,000 for international trading companies and $100,000 for consultancy companies, as examples. The registered capital amount is usually suggested by the local government.
7. Full Contact Details for All Involved Executives and Shareholders: We need the complete contact details for all executives and shareholders. This includes addresses, emails, and phone numbers.
5. I submitted the WFOE registration questionnaire to JR & Firm via email, what's next?
Once we receive the completed WFOE registration questionnaire, we review it carefully and follow up with our clients accordingly. If there’s any missing information, or if the company requires additional permits or licenses based on its planned products or services, we will inform the client. If everything is in order, we prepare the application documents, attach our clients’ documentation, and submit the WFOE registration application. The estimated waiting period for feedback from the government on the registration application is approximately 10 business days. Please note that timeframes in China are approximate due to government bureaucracy.
6. How long does it take to get my WFOE license after the registration application is submitted?
Once the WFOE registration application is submitted, the government generally responds within 10 business days. If approved, they will issue the company’s structural documents, which the founders (shareholders) and executives (director and supervisor) are required to sign with a black gel pen and mail back to us (Note: In China, only black gel pens are acceptable for signing legal documents; other colors and ballpoint pens are not accepted). We then submit the signed documents to the company registrar and await the business license. The waiting period for the business license is roughly 10 business days unless expedited service was purchased. With expedited service, a business license can be obtained within 2-5 business days. Contact us for more details about the expedited service.
7. Great, I have obtained my WFOE business license, what is the next step?
Once we secure the WFOE business license, we will contact our clients and the bank to schedule an appointment to open a corporate bank account for the company. Please note, the company director must be present in China to open a corporate bank account and their citizenship should not be among the countries sanctioned in the bank’s system. Alongside being present, the director needs to provide a Chinese phone number linked to their passport and a second person’s passport and phone number linked to this second person’s passport. This second person can be anyone in China (provided their citizenship isn’t among the sanctioned countries) with a Chinese phone number. This requirement is due to the banks’ need to issue online banking devices that require two people’s information. Legally speaking, this second person doesn’t have any rights or obligations regarding the company’s finances or bank account. While this might seem unusual, it remains a requirement, so we advise clients to identify such an individual in China before opening a bank account. The bank account opening process takes around 5-6 hours, and we recommend our clients exercise patience during this process.
8. I have my WFOE bank account opened, what is the next step?
After your WFOE bank account is opened, we’ll proceed to contact the customs department to initiate the process for the e-port device (if you’re registering an international trading WFOE focused on import/export. Note that e-port isn’t required for consultancy or other types of companies). This process typically takes about 5 business days, and we’ll mail the e-port device to our clients once it’s secured.
9. I have obtained my e-port device, are there any other steps to be completed before I start my company’s operations?
Yes, following the acquisition of the e-port for the WFOE, we’ll register the company with the tax department. This process generally takes around 14 business days, and it requires the company director to visit the tax office in person for ID verification.
10. After the WFOE tax registration, are there any other steps involved before the company becomes active?
Indeed, the final step in the WFOE registration is the foreign currency permission application. This process typically takes around 7 business days and necessitates a visit to the relevant government department. After securing the foreign currency permission, the WFOE can commence its operations.
On the whole, the complete process for WFOE registration can span anywhere between 4 and 8 weeks. As we mentioned earlier, all timeframes are approximations due to the inherent unpredictability of government bureaucracy. Although these factors are beyond our control, we will do our absolute best to expedite the process.
Jasur Mavlyanov, an experienced entrepreneur and legal expert, has built a notable career in international business, with a focus on China. With over 13 years of experience living and working in China, Mavlyanov has acquired valuable insights into the Chinese legal system and business environment.
As an entrepreneur, Jasur founded JR & Firm LLC, a company dedicated to providing legal services to global clients entering the Chinese market. His leadership has helped the firm become a reliable partner for businesses navigating the complexities of Chinese regulations and laws. READ MORE about Jasur.