Guide - 06 January 2021

Lujiazui: The Beating Heart of China's Financial Services Sector

Pudong New Area, a municipal district in Shanghai, celebrated the 30th anniversary of its development and opening-up on 12 November 2020. Over the past three decades, Pudong has transformed from a rural area to a district with gleaming skyscrapers, and Lujiazui is becoming a leading financial and trading centre in the Asia Pacific region.

Despite occupying only an 8,000th of the land area in China, Pudong New Area accounts for an 80th of the nation’s GDP. In 2019, Pudong’s GDP reached 1.2734 trillion yuan, ranking first in Shanghai, 200 times larger than the figure 30 years ago.

Pudong New Area has been actively attracting foreign investment, especially in the field of finance. It has achieved several national milestones never experienced in China. For instance, it hosts the nation's first foreign-invested insurance company (AIA Shanghai Branch), the nation's first foreign bank (Japan Fuji Bank Shanghai Branch), the first Sino-foreign joint venture fund management company (CPIC Fund Management Co., Ltd.), and much more.

The Birth of the Lujiazui Free Trade Zone / Lujiazui Financial City

The Huangpu River flows through Shanghai, dividing the metropolis into two parts: Pudong (East) and Puxi (West). Pudong remained underdeveloped until the central government decided to launch the reform and opening-up of the Pudong New Area in 1990.

The Lujiazui Finance & Trade Zone was established soon after the redevelopment of Pudong and it is the only national-level development zone in China whose name reflects a union of the finance and trade industries.

In 2015, the Shanghai Pilot Free Trade Zone officially expanded to the Lujiazui Finance & Trade Zone, making the Lujiazui Finance & Trade Zone an important part of it. With the advantages of the Free Trade Zone (FTZ), a large number of projects in the service sector were aimed at the innovative district, turning the new Lujiazui area of the Shanghai FTZ into the Lujiazui Financial City.

Why Choose Lujiazui Financial City?

Lujiazui Financial City provides a soft landing platform for foreign financial institutions and talents to engage in active financial transactions using a comprehensive financial market system, robust infrastructure and a friendly investment environment.

Meanwhile, Lujiazui aims to be a gateway into China for investors across the globe. It has been the regional headquarters for Fortune 500 companies, international top-tier law firms, and credit and insurance institutions.

1. Location Advantages

The Lujiazui Free Trade Zone is located in the middle west of the Pudong New Area, with the Huangpu River to the west, the Jinqiao Development Zone and Zhangjiang High-tech Park to the east, and the World Expo Area to the south, covering a total area of 31.78 square kilometres.

The north of the Financial City is connected to the Waigaoqiao Port Area where, every year, trillions of crates of goods are shipped all over the world, showing its geographical advantage and the link between finance and global trade.

The Financial City also has the advantage of convenient international air routes thanks to the adjacent Shanghai Pudong International Airport, a major hub for international air routes.

2. Talent and Workforce

There are more than 500,000 employees in Lujiazui with an average age of 29.5, 70% of whom have a master's degree or an even higher level of education. These talents are generally client service professionals, highly educated, internationally-minded, and younger than the city’s average age. There are 300,000 people working in the financial sector here, with about 160,000 of them having overseas study or work experience.

To further attract outstanding talent from prestigious universities, Lujiazui launched the Shanghai Lujiazui Talent Recruitment Initiative in 2009, a key talent development programme connecting first-class universities in China and top financial institutions in Lujiazui.

As Lujiazui FTZ aims to build a new melting pot for the gathering and development of high-level financial talents from all over the world, it has continuously improved its living environment and introduced top international medical and educational resources in the area. The much-welcomed inflow of foreign talents into China’s financial sector is regarded as an asset of national interest and one of the main benefits of foreign direct investments in the district.

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3. Highly Open Business Environment

Lujiazui, often dubbed the Chinese Wall Street, is the largest financial zone in the mainland with more than 400 banks and financial institutions from China and around the world.

Lujiazui is also the headquarters of over 70 international conglomerates and about 5,000 foreign companies active in trade, investment and intermediary services. Nine of the top ten global asset management institutions have already settled in Lujiazui as their first choice for their entry into China.

With China's financial sector recently opening-up at a faster pace, Lujiazui has launched a series of additional implementation measures approved by the central government and local authorities. Firstly, April 2018 saw restrictions on the business scope for foreign insurance brokers fully removed, allowing them to enjoy the same opportunities as Chinese firms. Willis Insurance Brokers Co., Ltd. (one of the world's three largest brokers), thus became the first foreign insurance broker in China to be allowed to expand its business scope and it picked Lujiazui for that very reason.

In November 2018, 12 international asset management institutions, including State Street Corporation, the world's third-largest asset management company, signed a contract to settle in Shanghai’s Lujiazui Financial City.

Allianz SE (China) Insurance Holdings, a wholly-owned subsidiary of Allianz SE in Shanghai, was successfully approved in November 2019 and officially opened in January 2020.

All these examples not only show that the gateway of China's reform and opening-up is becoming wider and wider, but also that Shanghai together with Lujiazui Financial City is one step closer to its goal of becoming a global asset management centre.

4. Comprehensive Support

Foreign-invested businesses and projects, especially small businesses registered in the Free Trade Zone, can enjoy certain preferential tax benefits. For example:

  • Value-Added Tax (VAT)

A certain percentage of the local retainable portion of the declared VAT will be returned to the company annually as an incentive.

  • Enterprise Income Tax (EIT)

A certain percentage of the local retainable portion of the declared EIT will be returned to the company annually as an incentive, just like VAT.

  • Individual Income Tax (IIT)

If the IIT payable accounts for no less than 40% of the total amount of VAT, EIT and IIT, 40% of the local retainable portion will be returned to the company as an incentive.

Further to this, with the aim of creating a world-class business environment that respects the value of knowledge and better attracts domestic and foreign investors to choose Shanghai as a base, intellectual property is regarded as a vital factor in terms of the support and protection offered by local courts and officials.

Lujiazui Financial City works closely with the China (Pudong) Intellectual Property Protection Centre, aiming to improve local enterprises' ability to innovate and develop new and high technologies, keeping their intellectual property rights safe and secure.

Summary

The world of finance is more present than ever in Shanghai’s renewed DNA. After years of effort, Shanghai is now at the forefront of China’s financial opening-up and is a pioneer of reform and innovation in the sector.

As China strives to further widen its financial sector and turn Lujiazui into an even more vital spot for foreign direct investment, the Pudong authorities are committed to increasing investor confidence by helping foreign firms in doing business in mainland China.

Yuxiang Zhang, the Director of the Shanghai Lujiazui Finance & Trade Zone said: ‘As a new area emerging from the reform and opening-up, Lujiazui Financial City will bear in mind the historical mission of Pudong's reform and opening-up and promote the economic development of Lujiazui. In the future, Lujiazui Financial City will continuously enhance its voice and influence in the global financial industry chain, taking New York, London and other top international financial centres as role models, and strive to build itself into a world-class financial city.’

By joining hands with regulatory experts from Lujiazui Financial City, Hawksford is renewing its engagement to bridging foreign financial players with the opportunities offered by the Chinese market, striving to provide them with a first-class soft landing experience whenever they are ready to explore this new arena.

How Can Hawksford Help?

As an established provider of company registration and outsourced corporate services in Asia, Hawksford has more than a decade's worth of on-the-ground expertise guiding foreign investors in their regional market access decisions with 100 multilingual professionals based in Shanghai, Beijing, Suzhou, Guangzhou and Shenzhen.

By engaging with Hawksford professionals, foreign companies will be able to reduce the hassle and complexity in their business plans in China, including choosing the right type of corporate entity to make companies’ plans a reality.

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