This content is from: Local Insights


Shanghai has promulgated the New Regulations of Shanghai on the Examination and Approval of Foreign Investment Enterprises (the New Regulation), effective from October 1 1996. The New Regulation is significant in that it provides that the Shanghai Municipal People's Government shall, in accordance with state guidelines and the actual situation of Shanghai, formulate guidelines on foreign investment and the guiding directory of foreign investment enterprises for Shanghai.

In general, these guidelines for foreign investment should:

  • promote enterprises involved in advanced technology, equipment, and scientific methods;
  • raise the product standards and exploit international markets; and
  • advance modern construction in the municipality.

The New Regulation also stipulates that local governments of the districts and counties, such as the Shanghai Municipal Foreign Investment Working Commission, Pudong New District Administrative Commission and Waigaoqiao Bonded Zone Administration Commission, are responsible for the examination and approval of foreign investment enterprises in their city or area. If Chinese and foreign investment enterprises disagree with the approval by the relevant departments, or the specific administrative acts conducted by the relevant departments, they may apply for administrative reconsideration or file an administrative suit in accordance with the relevant regulations.

With regard to penalties, the New Regulation further states that if Chinese or foreign investors conceal information or commit fraud in the process of their application to establish foreign investment enterprises, the examination and approval authorities may reject their application or revoke the approval certificate after issuance. Other penalties may also arise in accordance with Chinese law.

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