Shanghai Chemical Industry Park

by Annie (Ran) Yan and Ron (Rongwei) Cai
[February 2002]

Shanghai Municipal Government recently established a Chemical Industry Park (the "Park"), which is designed to be an industrial zone devoted to the development of petro-chemical and refined chemicals production. The Shanghai Municipal Government hopes to build the Park into one of the largest and most concentrated chemical production bases in Asia and eventually in the world. So far, several major multinational corporations, such as BP, BASF, Bayer, have already decided to make investments within the Park. On February 1, 2002, the Administrative Measures of Shanghai Chemical Industry Park (the Administrative Measures) promulgated by the Shanghai Municipal Government came into effect.

ADMINISTRATION AUTHORITIES

There are three levels of administration authorities for the Park: Shanghai Chemical Industry Park Leadership Group (the "Leadership Group"), Shanghai Chemical Industry Park Administration Committee (the "Administration Committee") and Shanghai Chemical Industry Park Development Co., Ltd. (the "Development Company") At the top of the administrative hierarchy is the Leadership Group which is mainly responsible for establishing general policies and principles for the Park.

The Administration Committee is an organization set up under the authority of the Shanghai Municipal Government. Its responsibilities include: formulating and amending the development projects, plans and industry policies; approving the investment projects and land use, supervising the construction projects; coordinating the daily administration by different governmental authorities, such as customs office, foreign affairs office and Bank of China Shanghai Branch; providing the necessary instructions and services for the enterprises in the park; performing the other duties assigned by Shanghai City government.

Shanghai Chemical Industry Park Development Co., Ltd assumes the duty for the development and construction of the Park, investment and construction of municipal infrastructure facilities and utilities in the Park.

LEGAL FRAMEWORK FOR ATTRACTING FOREIGN AND DOMESTIC CAPITAL

• Approval Authorities

  With the authorization of the Shanghai Foreign Investment Commission, the Administration Committee is granted the authority to examine, approve, verify and confirm certain foreign investment projects and enterprises in the Park. The Administration Committee has the authority to approve the establishment of the following projects:

  (a) foreign investment projects in the "Encouraged" category which are not subject to State overall planning control;

  (b) foreign investment projects in the "Permitted" category whose total investment amount is no more than 30 million US Dollars; and

  (c) foreign investment projects in the first sub-category of the "Restricted" category and whose total investment amount is no more than 5 million US Dollars. The Administration Commission is also authorized to approve the change to the joint venture contracts and Articles of Association of foreign investment enterprises. Moreover, with the authorization of Shanghai Municipal Development Planning Commission, the Administration Commission is also authorized to examine, approve and administer investment projects in the "Encouraged" and "Permitted" categories.

• Formation Procedures
  

  According to the Administrative Measures, the time limit for the Administration of Industry and Commerce to complete the registration procedures for setting up an enterprise in the Park is shortened to three to five working days as long as all the required documents are submitted.

• Preferential Policies
  

  The Park is considered as a national-level development zone and according to the official of the Park, with the authorization of the State Development Planning Commission, the companies within the Park enjoy the tax preferential policies that are identical to those in the Pudong New Area.

• Land Use Right
  

  As the developer of the land within the Park, the Development Company is responsible for land use right transfer. The enterprises and organizations investing in the Park only need to sign land use right transfer contracts with the Development Company before completing the formalities for acquiring land use right with the Administration Committee.

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