New measures to attract foreign talent to Shanghai
Lewis Lu of KPMG China discusses the latest measures to foster Shanghai as a technology innovation centre and a leading global asset management centre by 2025.
In 2016 China set out a plan on accelerating Shanghai’s transformation into a world-class technology innovation centre.
A number of measures have been introduced in the past years to facilitate the plan, such as support for foreign investors to set up research and development (R&D) centres and ‘open innovation platforms’ in Shanghai, as well as a series of policies helping companies to attract foreign talent. The latter is important as China visa and work permit rules continue to be quite complex for businesses to navigate.
The latest changes are intended, in particular, to help small innovative businesses in Shanghai to hire talented foreigners. There are three main categories of foreigner work permits (FWPs) being FWP type A (foreign experts), FWP type B (foreign professionals) and type C (i.e. other foreigners).
The new Shanghai measures aim to make it easier to get all three of these FWP types for three varieties of foreign talent, being (i) foreign technology talent; (ii) foreign innovation talent; and (ii) foreign highly skilled individuals.
Since the COVID-19 disruption in 2020, FWP applications are conducted through a ‘virtual’ approval process. Following several refinements this is now at Version 4.0.
One of the measures is intended to allow small innovative companies get longer term visas for certain ‘foreign technology talent’. Specifically, scientific researchers who are involved in China national taskforce teams, and fresh PhD graduates who have majored in science and engineering, agriculture and medicine, can be treated as ‘foreign experts’ who can obtain the FWP type A.
This is advantageous as, while larger companies can often get FWP type A for their foreign hires, it has been historically much harder for smaller businesses. As these staff will be able to get the R visa with a 10-year validity, this means that these small businesses will be able to attract and retain this talent for the longer term.
That being said, most foreigners will still be brought in by small businesses on shorter visas. This is now also made easier as the application for the FWP type B, which is typically valid for two years, no longer requires the foreigner to meet many of the requirements that were set in the past in relation to education (e.g. college degree requirements), work experience (e.g. time requirements), and age.
Furthermore, in order to make working in Shanghai more attractive, foreigners whose skills fall into the ‘foreign technology talent’ category will be permitted to take on part-time jobs and start their own businesses without having to reapply for a new FWP. For foreigners whose skills fall into the ‘foreign innovation talent’ category, they will be able to extend their FWP with ease once they set up a physical office in Shanghai.
Overall, the 10,000 companies in Shanghai that are permitted to employ the three varieties of foreign talent should be able to get these staff more readily. That being said, there will be scrutiny of how the relaxed rules are used. The authorities will set up a database to capture incidents where false declarations are made. This is important, as some of the documentation requirements (e.g. overseas criminal records) are no longer required, and have been replaced with self-declarations. Any FWP that has been issued may be withdrawn, and a submitted application may be suspended, in case of false declarations.
Alongside these, Shanghai has also eased the documentation requirements for foreign exchange purchase and remittance requests (e.g. salary remittance) made by eligible foreign talent (e.g. FWP holders).
Foreigners holding the ‘Fast Pass’ (issued by Shanghai Administration of Foreign Experts Affairs) no longer need to provide tax payment records and a labour contract when conducting foreign currency conversion processes at the banks.
In parallel, China is also looking to foster Shanghai as an international asset management centre, with notable recent measures including:
Foreign investors may set up securities, funds, pension management institutions in Shanghai, either in the form of wholly foreign-owned enterprises (WFOE) or a joint venture (JV). Financial management companies can also be set up in JV form;
Expand the opening up of bond markets, allowing more types and numbers of foreign investors to be involved;
Explore allowing eligible foreign investors to participate in treasury bond futures trading;
Allow overseas asset management institutions to apply for the Qualified Domestic Limited Partner (QDLP) pilot scheme. QDLP institutions are allowed to receive investments from Chinese individuals and invest these in overseas private funds as well as foreign securities, commodity, and derivatives markets. The new measures also encourage QDLP institutions to set up their global or regional asset management centres in Shanghai to drive cross-border two-way investment;
Recruit high-end talent from well-known overseas asset management institutions, and facilitate them in relation to FWP and permanent residence applications; and
In the tax space, eligible asset management institutions may enjoy R&D expense super deductions for corporate income tax purposes (i.e. bonus deductions of 75% on outlays).
Using these and other measures, China policymakers are aiming to make Shanghai a key hub of Asian asset management and a leading global asset management centre by 2025.
Partner, KPMG China