EU chamber tells China to walk the talk on liberalising markets to boost FDI, cement Shanghai as global financial hub
- Shanghai has to reduce taxes and red tape, make the yuan fully convertible and broaden market access to draw more investment, says chamber leader
- European companies have a ‘heightened sense that precaution is necessary in the face of uncertainty’, Shanghai chapter chairman says
Shanghai has to cut red tape, reduce tax rates, make the yuan fully convertible and broaden market access for foreign companies to attract businesses, talent and capital, said Jens Ewert, a board member of the Shanghai chapter of the European Union Chamber of Commerce, adding that liberalisation over the past two decades has not lived up to expectations.
“I think it is still very far away from that,” Ewert told a conference in Shanghai on Wednesday. “There are structural issues around the currency and access to the market, which are still not fixed in 20 years.”
It is important for mainland authorities to walk the talk now and take a substantial step forward in luring foreign funds and talent.
The proposal to transform Shanghai into an established international financial centre echoes the city’s ramped up efforts to attract FDI after China reopened following the end of its strict Covid-19 pandemic curbs early this year.
Local authorities have extended a broad olive branch to global companies since the reopening, inviting them to invest in the city, which has traditionally been seen as a gateway for foreign capital and businesses to enter the mainland market.
Carlo Diego D’Andrea, chairman of the chamber’s Shanghai chapter, said a widely anticipated release of pent-up consumer demand did not take place after China’s reopening.
“There is a heightened sense that precaution is necessary in the face of uncertainty,” he told the conference, adding that the troubled property market and Beijing’s tightened legal frameworks to strengthen national security are deterring European businesses from making investments in China.
In July, a report by the European chamber showed that 33 per cent of its members had Asia-Pacific headquarters in Shanghai, down from 40 per cent in 2022 and a sign that the mainland’s most developed metropolis may have lost its lustre as an investment magnet.
China’s central bank reassures likes of HSBC, Tesla amid investment exodus
At the end of 2018, China announced that tax breaks for certain expatriate allowances would be phased out by the beginning of 2022. Under pressure from multinational companies, the government made a last-minute decision in late 2021 to extend the exemptions for two more years.
It is estimated that a foreign company would have to pay an extra 800,000 yuan (US$109,419) in taxes for a foreign employee with two children if the exemptions were scrapped.