European businesses in Shanghai – a 'One Shanghai policy' is needed
This article was originally published in Italian in Panorama on 6th December 2025.
Please note that this is a courtesy translation of the Italian language article originally published in the Panorama Magazine Issue at: https://www.panorama.it/attualita/economia/le-imprese-europee-a-shanghai-e-necessaria-una-one-shanghai-policy
On 12th November, the Shanghai Chapter of the European Union Chamber of Commerce in China released its latest Shanghai Position Paper, an important document outlining recommendations to improve the city’s business environment and support its ambitions for deeper internationalisation. Shanghai is already a pivotal global hub: it hosts the world’s largest port, is home to more than 80,000 foreign-invested enterprises (FIEs), and concentrates over 1,000 multinational corporations’ regional or global headquarters. One third of the Chamber’s entire China membership is based in Shanghai—its largest presence nationwide.
Yet despite this impressive profile, several indicators show that Shanghai’s ambition to position itself as the Asia-Pacific’s leading international hub still faces headwinds. No major international company is directly listed on the Shanghai Stock Exchange, unlike in Hong Kong or Singapore. Confidence among European firms has also weakened: 68% of members report losing business opportunities in Shanghai due to market access restrictions or regulatory barriers—second only to Beijing among the Chamber’s seven chapters. Moreover, 76% say that doing business in the city has become more difficult than in the previous year.
One of the most significant challenges to Shanghai’s internationalisation is the inconsistent operating environment across its districts. The city’s 16 districts offer various incentives—rental waivers, subsidies, discounts—to attract foreign companies and investment. Yet each district applies its own criteria, often with limited transparency. Some require companies to establish a locally registered entity directly owned by an offshore parent and capitalised through new foreign direct investment. This prevents firms from reinvesting their existing China earnings and instead forces them to deploy offshore capital, leading to unnecessarily complex corporate structures and multiple legal entities scattered across districts.
Taxation remains another major competitive concern. China’s individual income tax (IIT) rate can reach 45%, substantially higher than Hong Kong’s 16% or Singapore’s 24%. High earners in Shanghai enter the top tax bracket at around EUR 119,000—far lower than Hong Kong (EUR 559,000) and Singapore (EUR 670,000). Although the Lin-gang Special Area – a 119.5 km² free trade zone in Shanghai – offers a favourable 15% IIT rate for foreign talent, uptake among European firms remains minimal. In the Chamber’s 2025 Business Confidence Survey, only five of 198 Shanghai-based respondents (about 2.5%) reported operating in Lin-gang. Beyond Tesla’s Gigafactory, most investors in the zone are domestic or state-owned, with comparatively few multinationals. Companies cite Lin-gang’s distance from central Shanghai, shortages in housing and supporting facilities, and slower-than-expected population growth as deterrents. Extending such benefits city-wide would be beneficial to the competitiveness of the whole city.
Green energy access offers yet another example of uneven conditions. Renewable electricity is particularly expensive in Shanghai due to limited local generation, saturated Ultra High Voltage transmission lines, and the city’s location at the end of the national grid. Other cities facing similar constraints, such as Beijing, offer subsidies of CNY 0.01–0.02/kWh to offset the cost. In Shanghai, only the Pudong district provides financial incentives for renewable energy purchases—and these apply solely within its boundaries. Once again, this is a benefit that would serve European companies across the whole city.
European businesses remain committed to Shanghai and are ready to invest further. What they need is the ability to operate seamlessly across the entire municipality, without navigating a patchwork of district-level rules, criteria, and benefits. A clearer, more coordinated “One Shanghai policy” would significantly strengthen the city’s competitiveness, attractiveness, and long-term international appeal.
As China prepares to launch its 15th Five-Year Plan in 2026, there is a timely opportunity for Shanghai to refine its policy environment and reinforce its status as a leading global destination for foreign investment. A unified, transparent, and predictable business landscape would be a decisive step in that direction.
Therefore, the Shanghai Chapter advocates for the following measures:
1) Have ‘One Shanghai Policy’
2) Increase Shanghai’s international attractiveness
3) Support SME growth
4) Enhance Shanghai’s competitiveness in the green transition
5) Strengthen Shanghai’s supply chain resilience, including in export controls
If adopted, these measures could further enhance Shanghai’s competitiveness by improving its economic environment.
By: Avv. Carlo D’Andrea, National Vice President of the European Union Chamber of Commerce in China and Chairman of the Board of the Shanghai Chapter, Founder and Managing Partner of D’Andrea & Partners Legal Counsel
