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Frequently Asked Questions
Wholly Foreign Owned Enterprises (WFOE)
A Wholly Foreign Owned Enterprise (WFOE) is a Limited Liability Company established in China by foreign investor(s). A WFOE is very much like a LLC in the USA that it requires one member only.
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The registration procedures of a Wholly Foreign Owned Enterprise (WFOE) could be divided into 3 phases: aproval phase, registration phase and post-establishment phase.
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A Wholly Foreign Owned Enterprise (WFOE) could be terminated by way of liquidation or deregistration by its investor(s) or when the conditions of termination in its Articles of Association occurs.
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China Taxation
Under the current tax system in China, there are 25 types of taxes which could be divided into 8 categories. The major ones are Business Tax, Value Added Tax and Enterprise Income Tax. More
Representative Offices are also liable for Business Tax and Enterprise Income Tax. However, a RO could be exempted if its parent company is in the manufacturing business.
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Any individual who has domicile in China or who has no domicile in China but has resided in China for one year or more shall pay Individual Income Tax on his world-wide income.
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CHINA FOREIGN INVESTMENTS
CITY INFORMATION - SHANGHAI


Shanghai Fact Sheet

Introduction

Shanghai is the financial hub of China. It is estimated that over 30% of commercial activities in China go through Shanghai and its adjacent areas. At the end of year 2005, over half of the Fortune 500 firms had set up their presences in Shanghai, either in the form of Permanent Representative Office (RO), Wholly Foreign Owned Enterprises (WFOE, also known as Wholly Owned Foreign Enterprises) or Equity Joint Ventures (EJV).

With more than 200 years’ history for the financial industry, Shanghai was the biggest financial center in China and Far East’s major commercial center in 1920s and 1930s. Since 1990s, Shanghai has regained much of its vitality and is gradually emerging as a financial center for the region once again.

Location

Surrounded by the Yangtze River in the north, the East China Sea in the east, the Hangzhou Gulf in the south and Jiangsu and Zhejiang provinces in the west, Shanghai is the mid-point of China’s coastal lines and boasts the occupation of a perfect natural port. The city has a total area of over 6,300 square kilometers and is divided into 19 districts and 1 county. The most notable new developing district is Pudong New Area.

Population

Shanghai has a population of over 13 million, representing 1% of China's total. In 2002, with a GDP per capita of USD4,900, Shanghai employed around 7.9 million people.

Economy

Shanghai’s economy has witnessed fast and sustained growth in recent years. In 2000, the city's GDP reached USD49 billion. From 1992 to 2002, Shanghai had registered a double-digit annual GDP growth rate for nine consecutive years.

To evolve into a market economy, Shanghai has been adjusting and modifying its “ownership structure”. The proportion of the state-owned sector in the city's GDP dropped from 82% in 1995 to 71.4% in 2001, giving way to the non-public-owned sector.

The Chinese government is keen to restructure Shanghai's tertiary industry. Finance and insurance, commerce, transportation, telecommunications, real estate and information technology are the key sectors of development. In 2000, the five sectors made up for nearly 40% of the city's GDP. Among them, the finance and insurance sector had the fastest growth. With the internal structure of its tertiary industry further improved, Shanghai’s role as an economic center in China will no doubt be strengthened.

Infrastructure and Investment Areas

Shanghai is a major land, sea and air transportation centre in China. It has established stable trading routes with over 1100 ports in over 200 countries and regions. It has two airports. The newly built Pudong International Airport has a capacity of 70 million passengers per year.

The city itself is divided into:

Central Business District
Lujiazui Finance & Trade Zone and the Bund financial trade zone make up the Central Business District in Shanghai. Over 100 domestic and foreign financial organizations have established in this district including the regional headquarters of many multi-national corporations, such as Siemens and Johnson & Johnson.

Free Trade (Tax Bound) Zone
Waigaoqiao Free Trade Zone is one of the biggest trade zones in China. In 2000, reported turnover was USD6.5 billion. The total amount of export and import was USD92 million; the goods throughput was 14,620,000 ton; the container throughput was 1,840,000 standard containers. Up to 2000, more than 600 storage enterprises have set up in this Zone.

Pudong New Area
Pudong is designed to be built as a multi-functional and radiant modern city. From 1990 to present, the total investment of capital construction in Pudong New Area amounted to USD 11 billion. The ten capital construction projects, represented by Pudong International Airport, Pudong Cyberport, Mass Transit (No.2), Waigaoqiao Electricity Generation Plant, East China Sea Natural Gas have been completed.

Export Processing Zone
Jinqiao Export Processing Zone now has become one of the most important bases of high-tech industry in Shanghai. In 2000, the total production value of the Zone amounted to USD55 Billion. The major high-technology products produced in this area are automobile parts, micro-electronics, computer accessories, telecommunication parts and accessories, bio-technology products and photo-electric products.

High-tech Parks
Occupying an area of 100,000 square meters, there are 16 governmental research institutions and 70 civil institutions and enterprises established in the High-tech Parks up to the end of 2000.

Financial Industry in Shanghai

Shanghai is traditionally famous for its finance industry. It ranks top in the total number of licences granted to domestic and foreign financial institutions in China. As at the end of 2001 there were 17 local banks and 49 foreign banks establishing branches in Shanghai.

Law and Legal System

The legal system of China is similar to the European code law system. The National People’s Congress (NPC) is the ultimate law making body, whose functions are mostly delegated to the standing committee of the NPC, which enacts laws in accordance with the Constitution.

State Council, together with its various administrative departments, are also authorised to adopt administrative regulations and measures. These administrative regulations and measures, as long as not contravening the relative laws, are important source of laws in China. The administrative bodies are the sole interpreter of the administrative regulations and measures. Their power to interpret the laws is only limited, or subject to the adjustments of its supervisory bodies and the court.

In doing business in China, it is very important to check up all current laws and regulations applicable to the invested industry. As a promise to the WTO, China’s laws have been made more transparent. In fact, all laws and regulations applicable in Shanghai can be downloaded from government’s web site.

The People’s Courts are the judicial organs of the state, which are able to exercise independent power in accordance to the law. The People’s Courts and their judges are appointed by the NPC and its Standing Committee.

When a person believes that his/her right has been infringed by any administrative body, he/she can normally complain to its supervisory body, or resort to a review by the court under the administration law.

Currency and Exchange Control

The currency of China is Renminbi (RMB). The currency is a non-convertible currency and the exchange rate is officially fixed at RMB8.11 to USD1. Although exchange controls still exist on “capital account”, which is used exclusively for the inward remittance of “capital items”, exchange controls on “trade account” or ”current account” have in effect stopped to exist. It is very easy to remit dividends (after tax profit) from China. There is virtually no control on remittance of trade-related items.

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