To promote the development of and reduce negative impacts of COVID-19 on industries, as well as stabilize economic growth, on 18 May 2020, the People’s Government of Shanghai Municipality (the “Shanghai Government”) has issued its Several Policy Measures in Accelerating the Development of Specialized Industrial Parks to Promote Industrial Investment (“Several Measures”). The Several Measures contain 16 measures referring to industrial planning and layout, stimulation of innovation, implementation of land supply, fiscal and financial support policies and increased support in promotion of investment.
1. Development of specialized industrial parks and encouragement of enterprises’ relocation within Shanghai
a) According to the Several Measures, in the first phase, the Shanghai Government plans to develop 26 specialized industrial parks, with a total planning area of about 108 square kilometers. More than 25 square kilometers of land will be available for high-quality industries, and over 14 million square meters of property space will be provided. These 26 specialized industrial parks include the currently-existing Waigaoqiao Intelligent Manufacturing Service Industrial Park, Jinqiao 5G Industrial Ecological Park, Integrated Circuit Design Industrial Park, Zhangjiang AIsland, Zhangjiang Innovative Pharmaceutical Industrial Base, and Lingang New Area Large Aircraft Industrial Park. They mainly focus on leading industries such as integrated circuits, artificial intelligence, biomedicine, aerospace, new materials and intelligent manufacturing. The Shanghai Government intends to speed up in accommodating the leading enterprises of these industries into the specialized industrial parks as well as attracting other relevant enterprises in the relevant industry chains. On the basis of the policy of “One Park, One Policy”, each specialized industrial park shall be equipped with its own concentrated industry, perfect supporting facilities and complete functions.
b) The Shanghai Government intends to take the city’s industrial map as a guide for industrial investment and support the concentration layout of major industrial projects according to such industrial map. The Several Measures further encourage enterprises in Shanghai to choose proper locations for their businesses across Shanghai in accordance with the industrial map. Industrial enterprises are to be supported by the government in their cross-district relocation within Shanghai for their self-development and resources optimization. No governmental department may impose any obstacle on any enterprise’s application for its reasonable cross-district relocation within Shanghai.
2. Stimulation of innovative economy
a) In order to meet the changes in production and life-styles, new online economy including but not limited to industrial Internet, Internet medical care, online education, online culture and tourism, telecommuting, and fresh food retailing e-commerce shall be developed. The Shanghai Government, wants to create a number of new online economy ecological parks. This shall be done, especially through renovation and upgrading of old factories, old warehouses, standard industrial factories and commercial buildings. Further, the Several Measures state that market access for the new online economy shall be eased in these specialized industrial parks while inclusive prudential regulatory models and management measures, e.g. expanding the list of exemptions from penalties, may be carried out.
b) In addition to the development of new online economy, the Several Measures confirm the development of infrastructure in new areas, e.g. in information infrastructure (esp. 5G), artificial intelligence, industrial Internet, intelligent automated vehicles and smart grid. The construction and application of this new infrastructure in Shanghai may drive the development of new technologies, new modes of operation and new models.
c) Further, the Shanghai Government clarifies in the Several Measures that it will increase its support for science and technology innovations and accelerate the transformation and industrialization of scientific and technological achievements. Domestic and foreign cutting-edge research and development (“R&D”) institutions in science and technology, functional headquarters, leading enterprises and innovation platforms that have been introduced to or developed in the relevant specialized industrial parks shall be subsidized up to RMB 40 million per company. Industrialization projects of R&D in core technologies that are independently developed by the enterprise or through collaborative innovation shall be financially supported with up to RMB 10 million per company. The relevant governmental departments shall also compile a recommended directory of innovative products and increase the government procurement of innovative products. The Shanghai Government may provide financial support for sales of major equipment (limited to the first set), materials (limited to the first batch) and software products (limited to the application of their first versions) at no more than 30% of a single product’s price in the respective sales contracts.
3. Guarantee of land supply
a) In accordance with the Several Measures, land supply for high-quality projects in integrated circuits, artificial intelligence and biomedicine, etc. shall be optimized. The Several Measures expressly state that for major industrial projects with an investment of more than RMB 1 billion, national strategic industrial projects, strategic key industrial projects at the Shanghai municipal level, manufacturing innovation centers and enterprise technology centers at Shanghai municipal level and above, as well as major industrial projects identified by each district of Shanghai, a 50-years land use right period may be adopted. Although the maximum use term for granting industrial land use right is50 years, nowadays in practice, in Shanghai land use rights on industrial land are usually only granted for 20 years, unless the projects are of great importance to the State or Shanghai Municipality. In addition, the minimum transfer price of the industrial land use rights can be implemented in accordance with the national minimum industrial land transfer standards. The minimum transfer price of the land for R&D use shall be implemented in accordance with Shanghai’s benchmark price for R&D land. Alongside with the adoption of bottom line management of land prices, land transfer with programs and concession of standard lands are also encouraged.
b) The use intensity of industrial land shall as well be enhanced with more supporting functions upgraded as regulated under the Several Measures. The floor area ratio of industrial land (excluding those using special processes) shall not be less than 2.0, and the floor area ratio of general R&D land shall not be less than 3.0. The proportion of transferable properties of industrial land for standard factories and general R&D land of the platform of specialized industrial parks and leading enterprises (excluding those used for ancillary facilities) shall not exceed 50%. On industrial land for single use, however, the proportion of constructions for other industrial uses and amenities is increased to 30% of the total above-ground floor area, of which the proportion of amenities shall not exceed 15%.
c) To better accommodate major industrial projects the Shanghai Government, as stated in the Several Measures, will make full use of market mechanisms on existing land resources and land plots with low utilization ratio. The specialized industrial parks shall intensively promote the construction of infrastructure and provision of supporting functions as well as construction of high-quality standard factory buildings and R&D buildings, in preparation of future major industrial projects. Industrial land under inventory with an approved increase in floor area ratio and additional underground space will not be subject to additional land price. Premises under inventory and on the allocated land can be used to develop new businesses and models. The use of land, the right holder of the land use right and the type of rights shall remain unchanged during a 5-years transition period. Also, land plots with low utilization ratio may be bought back by the Shanghai Government for the specialized industrial parks’ transformation and upgrading purpose.
d) The governmental departments at both the district level and the municipality level shall guarantee the land supply capacity, energy consumption capacity and environmental capacity of normal major industrial projects and other projects identified by the municipal government, respectively. Key industrial projects in integrated circuits, artificial intelligence and biomedicine, etc. can be supplied with land before the internal settlement of land quota at the district or municipal level.
4. Set-up of fiscal and financial support
a) In order to increase the governmental support for technological transformation of enterprises in the characterized industrial parks, the Shanghai Government at both the municipal and district levels shall continuously, precisely and accurately support a number of major industrial projects by comprehensive use of investment subsidies, capital funds, loan subsidies and entrusted loans. The guiding and leveraging role of special funds for technological transformation shall be used in speeding up technological transformation, especially in major projects, key industries and core links. The scale of special funds for technological transformation shall be further expanded, of which 4 special funds with RMB 100 billion each have been expressly mentioned under the Several Measures:
(1) A leading industry fund amounting to RMB 100 billion for major industrial projects in three leading industries, i.e. integrated circuits, artificial intelligence and biomedicine;
(2) A special preferential loan fund for new infrastructure, totaling RMB 100 billion;
(3) A special fund for medium- and long-term loans to advanced manufacturing enterprises, totaling RMB 100 billion; and
(4) A development fund for secondary development of the specialized industrial parks, totaling RMB 100 billion.
b) Financial institutes are encouraged to formulate special financing programs to meet the financial needs of industrial projects. While the scope of medium- and long-term loan lenders with low interests has been extended from integrated circuit to other industries such as artificial intelligence and biomedical, enterprises are also encouraged to make good use of the special refinancing policies issued by the PRC People’s Bank and the special loans of policy financial institutes in resumption of work and production.
5. Improvement in investment promotion services
a) A new contact system between the officials of the Shanghai Government and the major industrial projects shall be established. Major industrial projects with an investment of over RMB 10 billion shall be handled with the involvement of a corresponding governmental official at the municipality level. Key industrial projects with a total amount of investment of over RMB 1 billion shall be coordinated with a specialist designated by the municipal governmental departments. Each district shall also establish its own contact system for industrial projects.
b) The Shanghai Government also mentioned in the Several Measures that it aims to provide a “Green Channel” for the approval and examination process of major industrial projects such as Tesla. The environmental impact assessment, for example, may be exempted or simplified pursuant to the Shanghai’s Implementing Opinions on Reformation of the Environmental Impact Assessment System and other measures. These projects, however, must be major industrial projects located in the so-called regional cooperation areas of plan environmental impact assessment and environmental impact assessment of construction projects. Low-risk non-government-invested industrial projects that are less than 10,000 square meters shall be entitled to get their construction permits in one-stop, and to obtain their comprehensive completion acceptance and real estate registration in one stop. Fees for these projects’ geological survey and supervision as well as water supply and drainage access to small projects shall be reduced or waived. Review on the design documents for the construction plan is canceled and is adjusted to supervision during or after the construction. The scope of the construction plan’s design documents under review, potentially, shall be further reduced.
c) The Several Measures further call to make good use of the regional independent approval policies for special talents in each district of Shanghai. Key investment promotion projects identified by Shanghai’s Investment Promotion Leading Group Office, for example, shall be in priority recommended to the lists of key entities of talent introduction and key supporting entities for employment of non-Shanghai fresh graduates. The Shanghai Government may additionally increase its introduction and service security for talents at shortage of key industrial projects.
d) Furthermore, the Shanghai Government shall, as stated in the Several Measures, support the reasonable housing needs of executives and core technical personnel of key investment promotion projects. The district governments, municipal state-owned enterprises, specialized industrial park platforms, social development institutes and enterprises at demand are encouraged to cooperate in the development and construction of talent apartments in and around the specialized industrial park with high level of industrial concentration and high transportation convenience. Such talent apartments can be built through the centralized construction of new housing, the purchase or rental of existing housing in the current market, the use of housing inventory and construction of new housing on collective construction land, etc.
In the past years it seemed that Shanghai is becoming less interested in industrial investment and shifted its focus to attract more service industry. It seems that COVID-19 has served as a bit of a game changer and currently also industrial investment becomes of interest again, although not any industrial investment, but particularly new and high-tech industries and large investments. The Shanghai Measures are a clear sign that the Shanghai Government is committed to provide support for such qualified industrial development to help to overcome the impacts of COVID-19 and to stabilize and further develop the economy in 2020.