Doing business in Shanghai

Why the rebirth of the city as China’s commercial centre has proved popular in attracting service-based businesses


Why the rebirth of the city as China’s commercial centre has proved popular in attracting service-based businesses

Business-wise, Shanghai was re-born in the mid to late 1990s. Once the commercial centre of China before the revolution in 1949, the city’s business interests were constrained under communist rule, and it reinvented itself as a hub for the state. In the 1990s, it became an economic development project for the era of China’s leader Deng Xiaoping. Pudong, on the east of the Huangpu river, rose from the swamp to become a modern financial centre, complete with iconic skyscrapers. This contrasts with the historic part of the city, Puxi, on the west side. Indeed, many companies from the creative industries base themselves in Puxi’s French concession area, with its more elegant buildings. Meanwhile, the old waterfront, Bund, is home to Gucci, Armani and Virgin Atlantic, plus several top restaurants. Any entrepreneur looking to locate their business in Shanghai should bear this in mind, suggests Nick Thomas, executive director China for the China-Britain Business Council (CBBC), a membership body created to help British businesses in China.

Service centre

Shanghai is replete with large banks, plus insurance, advertising, legal, accountancy and architectural firms. It’s also a city where businesses operating in the advanced technology space are prevalent, due to state enticements. Predictably then, China’s objective, says Thomas, is to make Shanghai a global financial centre by 2020. Shanghai has also become China’s leading market for consumer goods, and is the place where foreign retailers test the water. The local populace sees itself as more international than in other parts of China, and the ex-pat community is prominent. “You get pretty good English language skills in ‘first tier’ Chinese cities, and many people have travelled abroad,” says Thomas, whose organisation is a UK Trade & Investment delivery partner primed to offer advice, contacts, research, translation and recruitment services.

Logistical advantage

Shanghai’s transport infrastructure is world class, says Thomas, with high-speed railways and an underground network surpassing London in terms of combined track length. Flight options, too, are good, and being in central China, it’s easy to reach Beijing and Shenzhen. These major cities, plus Guangzhou, are not as central to their region as Shanghai, adds Thomas, which has surrounding provinces boasting centres with around six million people. All these plus factors, however, make office space in the city comparatively expensive. For this reason, Thomas says manufacturers should also think twice about sourcing from the region.

Ripe for expansion

One entrepreneur who chose Shanghai is Graham Curren (above), founder of leading-edge technology consultancy Sondrel. He launched in Xi’an, two hours from the city, but the company has gravitated towards Shanghai. It now employs seven, but plans to expand. “The original idea was to outsource from Europe, but we’ve started to sell directly to China as well,” explains Curren. “By the end of this year, it will be bigger than the rest of Europe for us.” In moving to recruit quality engineers, Sondrel has swallowed the premium cost of locating in high-tech zones, where incentives, such as free office space and tax breaks, make the decision easier. Language has proved more of an issue, Curren adds, saying half of the people he deals with require translation. Bureaucracy, too, has been a bugbear, due to what Curren says are complex legal and tax regimes. Also, he believes the business culture of telling you “what they think you want to know”, rather than the full story, adds to the challenge. “I can’t underestimate how much effort it takes,” says Curren. “It can be expensive and take time to sell into China when you consider translation, legal and tax issues, but the plus side is it’s relatively cheap to get others to do it for you.” Sondrel worked with Intralink, which helps firms locate in China. It offered sales introductions, sourced accountants and lawyers, plus advised on legal structures, yet the move still took around nine months.

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