China Market Watch: Suspension of Investment Company Establishment and Smart Manufacturing in Shanghai

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Hit on China’s Financial Sector: China Suspends the Approval of Investment/Fund Management Companies

In order to crack down on illegal fund raising activities and restore the order of China’s financial market, the Chinese government has decided to restrict the approval of investment related registration applications nationwide starting January 12. The restrictions implemented differ per city and district. For example, Beijing has already suspended the registration of all companies whose business scope contains words such as “investment,” “capital & fund,” “equity investment,” and “finical management.” The officer of the Administration for Industry and Commerce (AIC) stated that currently the length of this suspension period remains unclear.

On January 21, the Shanghai FTZ started to impose restrictions on the approval of three types of companies: investment management companies, assets management companies and finance lease companies. Specifically:

  • The shareholders of the company (be it domestic or foreign-invested) will be interviewed by the government officer before incorporation;
  • Different from the policies in Beijing, it is still allowed to set up consulting companies such as an investment consulting company; and,
  • Approvals of finance information service companies and internet finance information service companies are suspended.

However, these restrictions are lifted in certain remote districts in Shanghai including Fengxian district and Baoshan district.

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The Development of Smart Manufacturing in China’s Financial Capital

Shanghai has started to gear up for the development of its smart manufacturing industry. Smart manufacturing, generally defined as the sum of high technology manufacturing industries such as robotics, semi-conductors, 3D printing and medical devices, will become the top priority in Shanghai in 2016. On January 20, some major development zones and districts signed memorandum of understanding (MoU) with the Shanghai Foreign Investment Development Board on attracting foreign investment into the sector.

So far, 9100 foreign-invested manufacturing companies have been established in Shanghai, constituting 25 percent of the total number of foreign companies and roughly one-third of the total FDI in Shanghai. Shanghai is also under the process of building entrepreneurship schools, with the aim of having more than 3,000 high-tech companies by 2020.

China Raises its Minimum Wage Levels by 14 Percent

By the end of December 2015, 27 provinces and regions had released their new minimum wage levels for 2016, with an average raise of 14 percent. Among these, Shenzhen led Chinese cities in monthly minimum wage levels at RMB 2,030, while Beijing has the highest hourly minimum wage at RMB 18.7. An increasing number of provinces have revised their minimum wages in 2015 despite the country’s ongoing economic downturn – only 19 regions adjusted their local minimum wage levels in 2014. Meanwhile, the pace of wage increases has slowed down over the past several years from a minimum wage growth rate of 22 percent in 2011. Minimum wages in China are set at the local level and updated throughout the year. This is done to account for the different standards of living across the country.


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