Starting from February 1, Shanghai's 2017 edition of the "Regulations on Encouraging Multinational Corporations to Establish Regional Headquarters in Shanghai" officially took effect. Once released, the Regulations immediately attracted widespread attention. Attracting multinational corporations to set up regional headquarters is an important measure for Shanghai to expand opening-up and improve the quality and level of foreign investment utilization. Since 2002, the implementation of headquarters economy policies has played an important role in optimizing the development environment for Shanghai's headquarters economy and raising the level of its headquarters economy. By the end of 2016, foreign investors had cumulatively established 580 multinational corporation regional headquarters, 330 investment companies, and 411 R&D centers in Shanghai.

With the enhancement of Shanghai's international influence and the continuous advancement of the building of the "Four Centers," the number of multinational corporation regional headquarters attracted to Shanghai has steadily increased. In 2016, Shanghai added 45 multinational corporation regional headquarters and headquarters-type institutions, 18 new investment companies, and 14 R&D centers, continuously consolidating Shanghai's position as the city with the highest concentration of multinational corporation regional headquarters in mainland China.

15 Years of Continuously Advancing the Headquarters Economy

As early as 2002, Shanghai took the lead nationwide in issuing the "Interim Regulations of Shanghai Municipality on Encouraging Foreign Multinational Corporations to Establish Regional Headquarters." In 2008, it revised and issued the "Regulations of Shanghai Municipality on Encouraging Multinational Corporations to Establish Regional Headquarters," and in 2011 it revised and issued the Regulations again. Over the 10 years, thanks to the continuous implementation of policies encouraging multinational corporations to establish regional headquarters, Shanghai's headquarters economy achieved good results. In particular, the 2011 edition of the headquarters economy policy played an important role in continuously optimizing the development environment for Shanghai's headquarters economy and raising the level of its headquarters economy. That edition of the headquarters economy policy had a validity period of five years and expired on December 19, 2016.

To implement the "Notice of the State Council on Several Measures for Expanding Opening-up and Actively Utilizing Foreign Investment," more actively use foreign investment to participate in the building of Shanghai's "Four Centers" and "Science and Technology Innovation Center," proactively adapt to new development trends of multinational corporations and new changes in international trade and investment rules, and maintain the continuity and stability of Shanghai's headquarters economy policies, the Shanghai Municipal People's Government issued the "Regulations of Shanghai Municipality on Encouraging Multinational Corporations to Establish Regional Headquarters" on January 27, 2017, effective from February 1. In light of Shanghai's actual conditions, the new edition of the Regulations continues and optimizes the headquarters policy, further optimizing the development environment for the headquarters economy in order to attract more multinational corporation regional headquarters to settle in Shanghai.

Thanks to continuous improvements at the institutional level, Shanghai has become fertile ground for multinational corporations to invest and do business. A series of headquarters economy policies have been introduced, providing a steady stream of momentum for promoting the sustained and healthy development of multinational corporation regional headquarters in Shanghai in areas such as recognition criteria, financial support, trade facilitation, entry-exit management, and talent introduction and employment, and have produced a clustering effect on Shanghai's economic development.

In recent years, the number of multinational corporation regional headquarters in Shanghai has steadily increased, and their economic scale has continued to expand. From 2012 to 2016, a total of 227 multinational corporation regional headquarters settled in Shanghai (the numbers for the five years were 50, 42, 45, 45, and 45 respectively), accounting for 39% of the 580 multinational corporation regional headquarters in Shanghai.

Headquarters Economy Development Maintains a Relatively High Level

More important than the steady increase in the number of multinational corporation regional headquarters is the continuous expansion of these multinational enterprises' business scope. Most multinational corporation regional headquarters have become "comprehensive headquarters" integrating multiple functions such as management decision-making, procurement and sales, R&D, logistics distribution, capital operations, and shared services. Among the 45 new multinational corporation regional headquarters and headquarters-type institutions added in 2016, 15 enterprises were recognized as Asia-Pacific headquarters. Well-known multinational corporations such as Husqvarna, Camso, and Lear all set up their Asia-Pacific headquarters in Shanghai. Shanghai currently has a cumulative total of 95 Asia-Pacific headquarters, 10 Asia regional headquarters, and 5 North Asia regional headquarters.

At the same time, the development quality of multinational corporation regional headquarters has also maintained a relatively high level, playing an important role in industrial driving, talent clustering, technological innovation, and factor radiation, and making important contributions to Shanghai's economic development. As of 2015, the cumulative total investment of multinational corporation regional headquarters in Shanghai reached US$45.7 billion, with an average of more than US$88 million per enterprise; in 2015, the operating revenue of regional headquarters reached RMB 592.6 billion, with an average of more than RMB 1.1 billion per enterprise; total tax payments reached RMB 41.7 billion, with an average of more than RMB 80 million per enterprise; and employment reached 177,300 people, with an average of 343 people per enterprise. Multinational corporation regional headquarters accounted for only 1.26% of the number of foreign-invested enterprises in Shanghai, but their operating revenue accounted for 9.42%, total net profit accounted for 17.37%, number of employees accounted for 5.83%, and total tax payments accounted for 10.59%. In the 2016 ranking of the top 100 taxpaying enterprises in Shanghai's tertiary industry, multinational corporation regional headquarters occupied 12 places.