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Investment policies & Regulations in Pudong New Area

Examination & Approval of Foreign-Invested Enterprises

Foreign Investment in Real Estate \ Representative Office

Operation & Administration of Foreign Invested Enterprises

GENERAL BACKGROUND OF SHANGHAI

Shanghai extends some 100 kilometers from east to west and 120 kilometers from south to north. The city has a total area of 6340.5 square kilometers, with land area of 6218.65 square kilometers, water surface area 121.85 square kilometers and urban area 792 square kilometers. The land and the coastal lines extend some 172 kilo-meters. At the end of 1996, the total population was reported to be 13.05 million, among which 7. 9275 million were urban dwellers.

The city of Shanghai is composed of 1 new area, 13 urban administrative districts and 6 suburban counties.The new area is the Pudong New Area; the 13 urban administrative districts are: Huangpu, Nanshi, Luwan, Xuhui, Changning, Jingan, Putuo, Zhabei, Hongkou, Yangpu, Baoshan, Jiading and Minhang, respectively; and the 6 suburban counties are Nanhui, Fengxian, Songjiang, Jinshan, Qingpu and Chongming.

ECONOMIC SITUATION

In 1996, the total economic volume of Shanghai kept growing rapidly. After expanding at an annual rate of 14% for 4 consecutive years, the economy went on to maintain a high increasing rate in 1996. The GDP of 1996 reached 287. 8 billion yuan, showing an increase of 13% over that of the previous year. Per capita GDP of Shanghai exceeded 22,086 yuan, increasing by 3,215 yuan over the previous year.

In 1996, added value of the service sector formed some 42% of the total GDP, growing by 2% over that of the previous year. The biggest driving force for growth of the city's GDP still lay in the secondary industry. The total industrial output increased by 15.5% over the previous year and the sales rate of industrial products reached 97. 84%; successful readjustments in the structure of the industrial sector were carried out; the scale and propping effect of the pillar industries continued to be strengthened; the proportion of the outputs of the 6 pillar industries and industries of advanced and high technologies, such as biology and medicine in the city's total industrial output rose to 50.7%. Agricultural production kept developing steadily, with the output increased by 5.8% over that of the previous year.

Exports and foreign investments maintained a trend of continual growth. Some US $13.2 billion worth of goods, 14% more than those of the previous year, were exported in 1996. There were 2,106 foreign investment projects newly approved, with pledged foreign capital of about $11.068 billion, or 105% of that of the previous year. The city ranked the 2nd in China in the volumes of both exports and the direct foreign investment pledged. In 1996, the city pumped 198.03 billion-yuan in its social fixed asset investments, showing an increase of 23.6% over the previous year.

In 1996, Pudong's GDP increased by 51.02 billion yuan, 20.2% higher than that of the previous year; the rate of growth was 7.2% above the average city level. Formational development has been progressing steadily: Local tax incomes in 1996 amounted to 28.849 billion yuan, 26.9% more than that of the previous years; its growth rate was 13% above that of GDP, A slight surplus remained after financial revenues and expenditures had been balanced.

HUMAN RESOURCES

Shanghai enjoys an unparalleled advantage in the quality of its human resources.

1. SUPERIORITY IN NUMBERS: Statistics of the 4th census conducted in 1990 showed that there were 806 professionals among every 10 thousand people in Shanghai and 2,103 among every 10 thousand workers, which ranked 2nd and 3rd respectively in the country.

Il. SUPERIORITY IN QUALITY: Statistics of the same source showed that among every 100 thousand people of Shanghai's population 6,534 had received high education of some sort. The Chinese Academy of Sciences has 78 academicians in Shanghai, who are among the most outstanding scholars in the fields of Mathematics, Physics, Chemistry, Biology, Geology, Technology, etc.; the Chinese Academy of Engineering has 34 of their academicians in Shanghai, who are playing a technologically leading role in such professional areas as Mechanical and Delivery Engineering, Information and Electronics Industry, Chemical Industry, Metallurgical and Materials Engineering, Energy and Mining Industry, Civil Engineering, Irrigation and Building Engineering, Agriculture, Light Textile and Environment Industry, and Medical and Health Industry.

111. SUPERIORITY IN EDUCATIONAL RESOURCES: Shanghai boasts a comprehensive and efficient education system that includes elementary education, vocational training, high education and adult education. Currently, there are 41 full-time colleges and universities in Shanghai, with 147.9 thousand undergraduate students, 16,800 postgraduate students, 21,000 staff members and 3,000 doctoral or masterial advisors. Of the key academic disciplines of Shanghai's colleges and universities, more than 40 subjects are up to advanced world standards. Furthermore, there are about 310 secondary vocational schools available to provide education and training for the current number of 230 thousand students who desire to become technicians and managers on middle levels. An integral part of Shanghai's education system, adult education offers schooling opportunities on various levels for around 2 million Shanghai residents each year. Shanghai is also one of the first regions in China that have adopted and popularised the system of 9 years of compulsory education. Among every 100 juveniles of the schooling age group, 99 receive compulsory education and 80 receive middle or higher level education of some kind.

IV SUPERIORITY IN THE INTRODUCTION OF QUALIFIED PERSONNEL: A national interchange center for qualified personnel, Shanghai has an efficiently operated human resource market and effective laws and regulations that are managing the flow of human resources. Every year, Shanghai attracts through its human resource market a large number of talented people from all over the country and from local sources.

MODERNIZED MASSIVE MARKETS

Shanghai has established a financial market system that includes Interbank Lending Market, Negotiable Instruments Discount Market, Security Market and Foreign Exchange Market. Interbank Lending Market, which functions as an allocating and transferring intermediary, facilitates prompt clearings and settlements among financial institutions and some 202.434 billion yuan was loaned through it in 1996.

Foreign Exchange Market. April, 1994 saw the establishment of Chinese Foreign Exchange Trading Center in Shanghai. All the financial institutions of China and foreign countries that are within China' s territory can be authorised to obtain membership in the Center. The Center is responsible for providing trading systems and settling services for its members that perform selling or buying deals in foreign exchange or RMB. In 1996, the annual trading volume was 62. 84 billion yuan.

By the end of 1996, there were 1,100 wholesale markets of various commodities in Shanghai, of which nine markets are nation wile. The 9 national trading markets include those of metals, coals, agricultural materials, chemicals, petroleum, grain and edible oil, cars, building materials and means of production. (Among them, Shanghai Metal Exchange has arisen to the 3rd largest metal exchange after the ones in London and Chicago.)

In 1993, Shanghai founded a national technology trading market. The first state technical exchange in China, Shanghai Technology Exchange has 1,364 members and 36'designated registration offices for technical contracts around the city. Trading volumes of technological transfers in 1996 reached 2.565 billion yuan, growing by 11.3% over the previous year.

By the end of 1996, Shanghai had an aggregate number of 64 institutions specialising in the interchange of human resources. The biggest of them is Shanghai, Human Resource Interchange Center, co-established by Shanghai Municipal Government and Personnel Ministry of China. During 1996, numerous massive human resource presentations were held in Shanghai; The foreign-funded companies in Shanghai employed about 70% of their staff through the market.

It has been expanded into a massive market that includes construction contracting, prospecting, designing, decoration, service supplying, etc.

MUNICIPAL INFRASTRUCTURE

Since 1978, and since 1990 in particular when the plan of developing and opening up Pudong to the outside world was launched, Shanghai municipal government has focused its efforts upon the improvement of investment environment and has completed some major infrastructure projects. Every passing day of the last few years saw some new changes in the appearance of Shanghai.

In 1996, 3 projects for reconstruction of and extensions to the Hongqiao international Airport alleviated the tensions caused by the inadequacy of waiting rooms, aeroplane parking places and runway space. The airport received some 12.46 million passengers, 12. 6% more than that of the previous year. The volume of freight handled by Shanghai Port reached 164 million tons in 1996; what's worth mentioning is that international container transportation has been growing rapidly, with a handling capacity of 1.97 million TEUs in 1996, an increase of 29% over the previous year. The figure ranked among the top 20s in the world's container transportation industry. The condition of public services and facilities has been continuously bettered. By the end of 1996, the maximum daily water supply for the city had reached 6. 0 million cubic meters, the per capita water consumption being as high as 137 litres per day and the quality of the tap water urban residents used having been greatly improved. About 8. 1 million cubic meters of gas was supplied every day, while some 86% of all the households in Shanghai had had gas apparatus installed. By the end of 1996, Shanghai had had an aggregate generator capacity of 7 . 655 million kilowatts and had generated some 39. 0 billion KWHs every year; the period between 1991 and 1996 saw a net increase of 3. 391 million kilowatts in the generator capacity of Shanghai. In 1996, Shanghai became the first city in Mainland China that had uniformly upgraded its telephone system to 8-digit-numbers. Currently, the total telephone installing capacity exceeds 4 million sets. Shanghai is among the leading cities in China where telephone is most widely used.

ENVIRONMENTAL PROTECTION

Environmental protection and its development are among the key factors in Shanghai' s municipal constructions. To reduce pollution of the city's water caused by industrial and household sewage, comprehensive controlling methods have been adopted since the 1980' s and have eliminated more than 60% of the total amount of waste discharged in the upper streams of the Huangpu River; after the first phase project of controlling sewage by confluence, which is aimed at cleaning up the Suzhou Creek, was completed in 1993, it has successfully removed some 30% of the total sewage discharges in urban districts, benefiting 2. 55 million people on 71 square kilo-meters.

Efforts have been focused upon clearing away discharges of smoke and ash from stoves, kilns, or heating ranges, upon removing factories heavy with liquid, solid and gas wastes and upon popularising the use of gasified fuel. As a result, improvements have been achieved in the atmospheric environment of Shanghai. All the urban districts and some of the suburban counties are basically free of "black smoke", while 100% of the streets in urban areas become "noise-controlled communities".

As a result of the unceasing efforts during the past few years, Shanghai mounted into the top ten cities in some 20 comprehensive environmental protection indexes among the 37 key metropolises of China in 1995 and 1996; particularly, for 1993 and 1994, Shanghai ranked the first in China in the index of controlling city pollution. It thus proves that Shanghai will grow cleaner and more beautiful in the days to come.

LIVING ENVIRONMENT

SHOPPING. Shanghai, always known as a shopping paradise, has pooled more resources and efforts since its adoption of the reform and opening up policy in the reconstruction of its three major business quarters, the Nanjing Road, the Huaihai Road and the Sichuan Road (N), as well as two massive commercial centers, the Xujiahui District and the Zhangyang Road. By setting up department stores, shopping centers, chain super- markets, membership delivery centers and specially stores, some world- renowned retailers have introduced their investments as well as modern management styles and advanced equipment into Shanghai.

CATERING. One of the cities that boast the most complete list of catering services in China, Shanghai has over 10 thousand restaurants and public houses that serve all varieties of traditional or international cuisine of different flavours and styles. Dishes served include Beijing, Shanghai, Shandong, Sichuan, Cantonese, Suchow, Hangehow, Ningbo, Wuxi, Yangchow, Anhui, Fujian, Hunan, Henan, Chaozhou, Muslim and vegetarian traditions, in addition to the competing foreign-style foods of French, Russian, Italian, British, German, American, Japanese, Korean and Indian features.

ACCOMMODATION. A good many top-class or other less expensive hotels, which have unique designs, luxurious and advanced equipment and which provide high-quality services, are available in Shanghai to satisfy all traditions and customs of different countries and to suit all tastes and pockets.

RECREATIONAL ACTIVITIES. One of the key national tourist cities of China, Shanghai now has over 400 scenic spots, among which are many places of historic interest and cultural heritage. For the past few years, Shanghai has imported much foreign investment to build or to develop some massive-scaled top-class entertainment and recreational amenities. Completed and put into use in 1996, the Universal Fun Fair, American Dream Fair, Chinese Ethnic Park and 2 golf courses, Sun Island and Tangxing, are welcoming visitors from all over the world. Fully developed or currently under construction are some elegant or popular cultural, entertainment or sports amenities such as East Music Hall, Shanghai Grand Theatre, Shanghai Circus, Shanghai History Museum, the 8O-Thousand-People Stadium , Karaoke, KTV and bowling alleys, suiting the needs of different interests and hobbies.

SERVICES. An elegant living environment that offers complete, convenient and comfortable services for foreign dwellers has long since taken shape in Shanghai. It has, for instance, some formal or special-grade beauty and hair salons, providing supreme beauty, making-up or hairstyle design services. And all the big comprehensive foreign guests with special outpatient departments and wards which are well equipped and where you can receive high-quality services from the most celebrated doctors in Shanghai. Apart from the above-mentioned facilities, some new services that can better satisfy the needs of foreign visitors will appear with the development of the service market.

EDUCATION. To provide educational opportunities for the children of so many foreigners working for her, Shanghai has founded since the 1980s some international schools of foreign management and teaching staff to recruit children of this kind; the schools so founded include Shanghai American School, Shanghai Japanese School, Shanghai Yao Zhong International School, Shanghai Middle School-the International Section, Shanghai German School, etc.. Furthermore, some kindergartens that have advanced equipment and superior education qualities, such as Shanghai Song Qing-ling Kindergarten- International Section, have also opened their doors to welcome children from other countries. An open education system that has high, middle and elementary educational levels has taken form in Shanghai.

PUBLIC SECURITY. Shanghai has a stable social and living environment with a high public security level. Road accident rate and crime rate are among the lowest of all the big cities in China, while detection rate ranks among the highest. What's more, its social security index is also on a level unparalleled by other metropolises of similar kind in the world.