Interpretation of "Several Measures of Shanghai Municipality to Encourage Foreign-Invested Enterprises to Reinvest within the Territory of China

I. What is the background for the introduction of this policy?

In recent years, reinvestment within China by foreign-invested enterprises has become an important mode of foreign investment. The proposals for the 15th Five-Year Plan for National Economic and Social Development, deliberated and adopted at the Fourth Plenary Session of the 20th CPC Central Committee, clearly state the need to expand high-level opening-up and promote domestic reinvestment by foreign capital. Previously, the National Development and Reform Commission and other departments jointly issued the “Notice on Implementing Several Measures to Encourage Domestic Reinvestment by Foreign-Invested Enterprises” and other policies. To effectively implement these national policies and further promote foreign investment, the Municipal Development and Reform Commission and the Municipal Commission of Commerce, together with relevant units, extensively solicited opinions and suggestions from foreign-invested enterprises, related business associations, and other stakeholders, and formulated the “20 Measures for Reinvestment” based on practical considerations.

II. What are the main features of this policy?

First, it explicitly supports various forms of domestic reinvestment.Foreign-invested enterprises established in China in accordance with the law are encouraged to use their undistributed profits, or overseas investors may reinvest legally obtained domestic profits in both local and foreign currencies. These reinvestment methods include establishing new enterprises in the city, increasing capital in existing enterprises, acquiring shares, equity, property interests, or other similar rights in domestic enterprises, as well as investing in specific projects.

Second, it emphasizes the combined effect of policy measures.Focusing on issues of concern to foreign-invested enterprises regarding domestic reinvestment, while fully implementing national policies, the measures propose 20 specific actions across four dimensions—facilitating project implementation, streamlining investment and operations, ensuring effective tax policies, and optimizing investment promotion—to create a synergistic policy framework.

Third, it highlights coordinated efforts between government and enterprises.While formulating support policies targeted at enterprises, it also proposes reforms to the foreign investment system and mechanisms, such as establishing a new model for high-level investment promotion, piloting domestic investment information reporting, and conducting trials of performance evaluations for foreign investment promotion, thereby helping enterprises better benefit from supportive policies.

Fourth, it prioritizes transparency and operability of policies.To facilitate business applications, a “Guide for Enterprise-Related Procedures” has been prepared and publicly released, listing the names of relevant matters, application procedures, consultation departments, and contact methods. To make it easier for enterprises to access policy information, a dedicated policy section titled “Domestic Reinvestment by Foreign-Invested Enterprises” has been set up on the Shanghai Foreign Investment Promotion Service Platform, compiling relevant policies. Additionally, an electronic book titled “Compilation of Policies and Regulations Encouraging Domestic Reinvestment by Foreign-Invested Enterprises in Shanghai” has been produced.

III. What are the main contents of this policy?

There are 15 measures aimed at encouraging domestic reinvestment by enterprises, including: supporting diverse reinvestment methods; strengthening project coordination services; optimizing land resource allocation; encouraging technological upgrades and transformations; guiding and supporting domestic production; promoting increased R&D and innovation; supporting participation in service sector opening-up pilot programs; simplifying procedures for medical device conversion; implementing multi-warehouse collaboration for pharmaceutical wholesale; facilitating food chain operations; implementing tax policies for profit reinvestment; guiding foreign investment toward encouraged industries; optimizing foreign exchange registration and capital utilization procedures; deepening the Qualified Foreign Limited Partner (QFLP) pilot program; and expanding financing channels for reinvestment.

There are 5 measures focused on optimizing investment promotion services, including: promoting the establishment of a new model for high-level investment attraction; strengthening coordination between central urban areas and new cities for investment promotion; piloting domestic investment information reporting; conducting trials of performance evaluations for foreign investment promotion; and intensifying publicity for investment promotion policies.