Preferential policies

An amendment to a regulation the Ministry of Commerce (MOFCOM) issued in 2004 even allows MOFCOM-certificated regional headquarters of foreign-funded companies in China to provide financing and leasing services.

Preferential policies introduced by local governments are more generous. Beijing introduced one as early as in 1999 giving tax rebates or exemptions as well as wider business scope.

Shanghai issued similar regulations in 2002 and since then, it seems to have started catching up with Beijing. The eastern metropolis is aiming to become home to regional headquarters of at least 200 MNCs by 2010.

Rose of Alcatel-Lucent says Shanghai boasts "a climate that is very supportive of commercial enterprises."

Siemens' medical unit is moving its headquarters from Beijing to Shanghai and one of the reasons behind the relocation is that "Shanghai has offered more preferential policies," says an official with Siemens' medical division.

Shanghai municipal government officials are particularly keen on the "Headquarters Economy", as they want the Chinese economic powerhouse to also emerge as a regional business hub, challenging Hong Kong and Singapore.

For Shanghai, the rapid rise of skyscrapers is also a vote of confidence in the city's image as an international city.

In January, Intel (China) Investment Co Ltd set up its regional headquarters in Shanghai. Announcing the news, the Shanghai Municipal Economic Relation & Trade Commission said on its website that Shanghai now hosts the largest number of regional headquarters of multinationals in China, second only to Hong Kong.

"Beijing is being eclipsed, as Shanghai has a lot of neighboring cities such as Suzhou, which are already manufacturing bases for many multinationals," says Zhao Hong, a research fellow with the Beijing Academy of Social Sciences (BASS).

"Besides, Shanghai enjoys advantages in transportation, as it has ports."

But Lu argues that Beijing still has unique advantages.

"When establishing research facilities, you need to get closer to your (target) markets," he says. "But when establishing regional headquarters, you need to get closer to market regulators and the governments to increase face-to-face opportunities."

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