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Trade

Shanghai mayor cuts red tape to woo investment as foreign firms mull relocating amid trade war

  • Mayor Ying Yong slashes time taken to register a new business, get manufacturing licence and access to electricity
  • Foreign investment in Shanghai up 2.1pc during the first nine months of the year to US$12.9 billion
PUBLISHED : Sunday, 28 October, 2018, 9:06pm
UPDATED : Thursday, 01 November, 2018, 4:10pm

Shanghai has stepped up efforts to attract foreign investment as some multinational companies seriously consider plans to move out of the mainland, as the tit-for-tat tariffs in the escalating US-China trade war render manufacturing uncompetitive.

Shanghai mayor Ying Yong said on Sunday that China’s commercial capital will further cut red tape, including reducing the time taken for a new company to complete business registration, obtain a manufacturing licence and gain access to electricity, soothing concerns about potential retaliatory measures against foreign companies operating in the country.

“Whatever the economic situation we will face, the door for foreign businesses will not be closed,” Ying told a press conference after the annual International Business Leaders’ Advisory Council meeting. “Instead, we will further open it for them.”

His remarks came after American and European businesses operating in China said they had fallen victim to the trade tensions between the world’s two largest economies.

European firms mull relocating mainland production to Southeast Asia amid escalating US-China trade war

In September, some 7 per cent of corporate respondents in a survey by the European Union Chamber of Commerce in China said they had either moved or were planning to move their production out of the mainland.

The companies said they were doing this to dodge the additional tariffs levied on key parts imported from the US used for manufacturing goods in China.

In another survey conducted by the American Chamber of Commerce in China, also conducted in September, nearly 50 per cent of the 430 US companies polled, said they were expecting a “strong negative impact” from the tariffs.

Half of US firms in China foresee acute pain from new tariffs as trade war escalates, AmCham survey finds

The US last month imposed 10 per cent tariffs on US$250 billion worth of Chinese-made goods, which will rise to 25 per cent on January 1.

Foreign direct investment has been one of the key driving forces of Shanghai’s economic growth over the past two decades, contributing nearly 30 per cent to the local gross domestic product, according to government data.

“For a developed metropolis like Shanghai, the loss of foreign investment will lead to massive job losses, reduced local economic output and diminished role as the country’s economic locomotive,” said Yin Ran, a Shanghai-based angel investor.

Tesla secures US$140.6 million plot of land for its Gigafactory 3 in Shanghai

Foreign investment in Shanghai grew 2.1 per cent year on year during the first nine months of 2018, topping US$12.9 billion, the mayor told reporters.

But there is a lack of reporting mechanism to show the withdrawal of foreign funds.

In mid-October, Tesla agreed with the Shanghai government to pay 973 million yuan (US$140 million) for a plot of land in Lingang, near the city’s free-trade zone. The move takes the electric car maker a step forward in building its US$2 billion Gigafactory 3 capable of producing 250,000 a year when it’s ready in two years’ time.

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