Operating in Shanghai: The devil’s in the details
Shanghai is the most international city in China, and many foreign companies set up their local office in the metropol. In the World Bank “Ease of doing Business”-ranking, China has since 2014 advanced from 96th to 31st position. But a successful Shanghai entry is still demanding, and it is essential to understand local conditions and particularities.
Expanding internationally can be daunting. There's several layers of cultural, legal and bureaucratic red tape to cut through in order to succeed. Guest writer Heidi Berg, founder of ShanghaiHeidi, shares her tips for how to set up a business in Shanghai.
The provinces in China are in many ways governed independently, with different rules and regulations. One can almost regard the provinces as countries. Shanghai is one of the biggest cities in China, and is classified as a city-province. The Shanghai government is positive to foreign investment and business, particularly within high-tech and other industries creating high quality jobs. Certain investments can get benefits such as tax exemptions.
Shanghai is divided into 16 districts. The largest is Pudong, with the international airport and free trade zones on the eastern side next to the Yangtze river, and the financial area Lujiazui in the west. When talking about “down town Shanghai”, people typically refer to Lujiazui or the districts Huangpu, Jingan or Xuihui.
The highest rents are of course in the skyscrapers of the financial district, while other central areas offer much more variety. Further from the city centre there are many industrial parks with good conditions for factories. Since the districts compete with each other to attract businesses, there are differences in taxation as well as other incentive schemes.
In general, setting up an entity in Shanghai is not difficult or too costly. For some types of business it is not even necessary to establish a local entity, for instance if sales can be made directly from Norway. But one should not take any shortcuts, and invest the time and resources necessary to understand regulations and requirements. If the scope of a business changes, one must apply for a new business licence, and it can even be difficult to relocate to another district.
Senior lawyer Therese Trulsen heads the Wikborg Rein law office in Shanghai. They have assisted many Norwegian companies in entering China since 2002.
“ A common mistake we see companies make, is not paying attention to the details in the early stages. For example to register their trademark in China before entering any business discussions. ”
Chinese IPR rules and regulations will improve further in 2021, but taking strategic steps will remain important. Generally, Chinese rules and practice are also viewed as rigid. “Many feel frustrated when filings and registrations are not approved due to a small issue, which can be as simple as what pen was used to sign documents. If one works meticulous and follow instructions fully, it is actually not that hard,” Trulsen adds.
A key for success anywhere in China is the local team. In Shanghai there is good access to English speaking staff, but the salary levels are higher compared to most other cities. For startups, there are several international accelerator programmes and communities that work with foreign founders based in Shanghai, such as Chinaccelerate and XNode. Brands who need marketing support to sell in China should definitively consider Shanghai, as most global brands have their Chinese head quarter in the city, and hence you also find the largest community of marketing specialists here.
Support for Norwegian companies in Shanghai
- Innovation Norway and the Consulate General: Generally support to Norwegian businesses, particularly with trade fairs and events.
- The Norwegian Seafood council: Promoting Norwegian seafood export companies
- Norwegian Business Association: Network for Norwegian business community to share experiences and keep updated on local issues
- NHO through a cooperation with DI-Asia Base: Shared office, recruiting and finance services etc. to SMEs entering China
Oslo and Shanghai
The relationship between Oslo and Shanghai goes way back. In recent years, it has become increasingly focused around business and academic collaboration, formalised in the 2018 agreement to facilitate trade opportunities between the two cities. You can read more about our work with Shanghai here.