Shanghai is China’s leading financial and commercial hub and a central actor in global trade. In 2024, it became the first port in the world to process over 50 million twenty-foot equivalent units annually.[1] It is also China’s largest city by gross domestic product, surpassing Chinese yuan (CNY) 5 trillion.[2] Guided by its ‘Five Centres’ strategy—aiming to establish itself as an international hub for the economy, finance, trade, shipping, and innovation—[3]Shanghai continues to attract global attention. Home to more than 80,000 foreign-invested companies (FIEs),[4] Shanghai stands as a key hub for international business. This is reflected in the Shanghai Chapter, which represents the organisation’s largest membership base with 560 members, accounting for a third of the total membership. The city’s appeal to international businesses is echoed by our members’ business sentiment: 64 per cent find it easy to do business in Shanghai, 74 per cent view the city as a better location than other Chinese cities for establishing a research and development (R&D) facility, and 38 per cent believe Shanghai holds a significant advantage in its innovation ecosystem.[5]

Yet, several indicators continue to challenge Shanghai’s ambition to be the Asia‑Pacific’s leading international hub. No international companies are directly listed on the Shanghai Stock Exchange,[6] in contrast with regional peers, such as Hong Kong,[7] or Singapore.[8] This underscores a key constraint on Shanghai’s aspiration to be an international financial centre: limited capital‑market access for foreign enterprises.

These constraints affect the confidence of European companies: 68 per cent of our members reported missing business opportunities in the city due to market access restrictions or regulatory barriers – second only to Beijing among the Chamber’s seven chapters.[9] Moreover, 76 per cent stated that conducting business became more difficult compared to the previous year.[10]

To address this, the Shanghai Chapter proposes five key recommendations designed to improve European businesses’ operations while enhancing the city’s internationalisation:

• Implement city-wide, consistent rules for FIEs addressing structural barriers – Make Shanghai more competitive by supporting companies’ access to renewables with improved grid access, fair pricing and incentives

Shanghai’s internationalisation depends not only on finance, but also on people. As we are in the last year of the 14^th Five-year Plan (FYP), Shanghai is working to restore its reputation as an open, dynamic and connected centre. The foreign resident population has reportedly more than halved since pre-pandemic times.[11] High living costs, limited support services for foreign nationals, and complex administrative procedures continue to hinder the city’s ability to attract and retain international talent in the long term.

Shanghai implemented several initiatives to attract more foreign investment. The Shanghai Pilot Free Trade Zone (FTZ)—created in 2013 and expanded in 2018 to include Lin-gang Special Area of China Pilot FTZ—offers incentives to foreign investors, including preferential tax policies and facilitation of cross-border data flows. However, adoption among members remains limited (only five respondents reported operating in Lin‑gang),[12] and the FTZ does not by itself provide a unified, citywide operating ecosystem across districts. The China International Import Expo (CIIE), which has been taking place annually in Shanghai since 2018, was also aimed at showcasing China’s open and liberalised market, a welcome signal given the stagnating EU exports to China and growing trade imbalances between China and the EU. Yet, only 13 per cent of our members joined the CIIE for the first time in 2023, and a third of potential newcomers were indifferent.[13] The CIIE would generate greater value by remaining aligned with its initial purpose to encourage increased imports. Although EU exports to China have risen slightly since 2018, they have declined over the past two years, and still lag behind the global average.[14] More importantly, these efforts have not addressed the growing trade imbalance, which reached euro (EUR) 304.5 billion in 2024.[15] As a result, these initiatives appear more like minor adjustments rather than meaningful structural reforms that can attract additional foreign investment.

Underlying barriers persist. Market access restrictions, a lack of a level playing field vis-à-vis domestic competitors, and the absence of a unified city-wide business framework prevent European companies from realising their full investment potential. Low domestic consumption exacerbates these challenges, and some recent national policies—such as lowering the luxury car tax threshold from Chinese yuan (CNY) 1.3 million to CNY 900,000—further discourage spending rather than stimulate it, particularly affecting European manufacturers in Shanghai, a major hub for high-income consumption. Local policies in Shanghai also contribute, such as the high cost of new motorbike plates, which limits the purchase and registration of premium bikes. Introducing a special category of plates or exemptions for collectable and luxury motorcycles and removing the national 13-year motorcycle scrapping policy could help support this segment and open a market where there is considerable potential.

Consequently, almost half of our members in Shanghai reported they would reinvest less than their historic average, while more than half would likely increase their investments in China if greater market access were granted.[17] Barriers are particularly high for small and medium-sized enterprises (SMEs),[18] which lack the resources of large multinational companies and face structural issues, such as limited access to finance or a lack of transparency in processes. An ecosystem in which only large or state-favoured enterprises thrive—while SMEs struggle—is not sustainable and prevents the city from fully harnessing its innovative capacity.

In April 2025, China announced export restrictions on key components, destabilising supply chains and placing additional strain on the EU-China trade relationship. Many of our members have since faced difficulties in obtaining applications and experienced delays in their processes, which further increases administrative complexity, resulting in reduced economic efficiency and, in some cases, production stoppages.[19] Given Shanghai’s role as a gateway for China, the city could play a crucial mediating role with the central government to expedite procedures, while providing guidance and policy interpretation at the local level.

Shanghai has set ambitious goals for the coming years to become a globally influential leader in six core industries by 2030: future manufacturing, future information, future materials, future energy, future space and future health.[20] The Shanghai Chapter is ready to help achieve these goals, and European companies can make a significant contribution to this effort. However, they are hindered from playing a role in several of these sectors. In the energy sector, limited access to renewable energy, the absence of subsidies and weak price signals reduce the business case for corporate procurement of green power. In the information and communication technologies sector, the market share of European companies decreased from 30 per cent in 4G to only three per cent in 5G, a sharp decline that cannot be explained solely by commercial reasons.[21]

The Fourth Plenum of the 20^th Central Committee of the Communist Party of China convened in October 2025 to discuss the 15^th FYP, emphasising the pursuit of a high level of technological self-reliance in strategic sectors and maintaining the country’s leadership in global manufacturing. To ensure that Shanghai maintains and enhances its global appeal, we encourage the local government to actively include European companies in the implementation process. The recommendations outlined in the Shanghai Position Paper 2025/2026 provide concrete measures to improve both the living environment for foreign nationals and the overall business climate for foreign enterprises, thereby further advancing Shanghai’s internationalisation.

To download the Shanghai Position Paper 2025/2026, go to: <https://www.europeanchamber.com.cn/documents/download/start/en/pdf/1375>

[1] Quotes from mayor’s keynote speech at IBLAC 2025, International Services Shanghai, 12^th October 2025, viewed 16^th October 2025, <https://english.shanghai.gov.cn/en-Graphic/20251012/5b729d84602e4339bd3abea164a681bd.html>

[2] Ibid.

[3] General Secretary Xi Jinping went to Shanghai to inspect and presided over a symposium on further promoting the integrated development of the Yangtze River Delta, Xinhua, 5^th December 2023, viewed 20^th October 2025,<https://www.gov.cn/yaowen/liebiao/202312/content_6918468.htm>

[4] Quotes from mayor’s keynote speech at IBLAC 2025, International Services Shanghai, 12^th October 2025, viewed 16^th October 2025, <https://english.shanghai.gov.cn/en-Graphic/20251012/5b729d84602e4339bd3abea164a681bd.html>

[5] Unpublished Shanghai-specific data collected for the European Business in China Business Confidence Survey 2025.

[6] Due to Chinese regulations, foreign companies cannot list directly on the A-share market and typically enter by acquiring a controlling stake in an existing Chinese listed company, as seen with international firms like Groupe SEB and HSBC.

[7] Hong Kong Exchange, HKEX, viewed 20^th October 2025, <https://www.hkex.com.hk/?sc_lang=en>

[8] Singapore Exchange, Asean Exchange, viewed 20^th October 2025, <https://www.aseanexchanges.org/market/singapore-exchange>   

[9] Unpublished Shanghai-specific data collected for the European Union Chamber of Commerce Business Confidence Survey 2025.

[10] This may seem counterintuitive, as 64 per cent of our members consider doing business in Shanghai to be ‘easy’. However, these figures measure different aspects of the business environment. The 64 per cent reflects the local ease of doing business—such as paying taxes, relocating, registering a business, or accessing utilities—while the 76 per cent who reported a deterioration in China’s overall business environment were referring to broader, national-level factors, including geopolitical tensions and ambiguous security-focussed regulations affecting their operations across China.

[11] Chen, L, Why China’s big cities are losing foreign workers even as post-Covid travel picks up, South China Morning Post, 17^th November 2024, viewed 29^th September 2025, <https://www.scmp.com/news/china/politics/article/3286717/why-chinas-big-cities-are-losing-foreign-workers-even-post-covid-travel-picks>

[12] Unpublished Shanghai-specific data collected for the European Business in China Business Confidence Survey 2025.

[13] European Chamber China International Import Expo (CIIE) Flash Survey 2023, European Union Chamber of Commerce in China, 3^rd November 2023, viewed 29^th September 2025, <https://www.europeanchamber.com.cn/upload/medianews/attachments/CIIE_Survey_2023_FINAL_VERSION%5B116%5D.pdf>

[14] Sandkamp, A, EU-China Trade Relations: Where Do We Stand, Where Should We Go?, Kiel Institute for the World Economy, May 2024, viewed 21^st October 2025, <https://www.kielinstitut.de/fileadmin/Dateiverwaltung/IfW-Publications/fis-import/f9a2be87-5855-42b5-bb52-79656914e0f8-KPB176.pdf> 

[15] Slight decline in imports and exports from China in 2024, Eurostat, 4^th March 2025, viewed 30^th June 2025, <https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20250304-1> 

[16] The Ministry of Finance and the State Taxation Administration issued a policy in July 2025 at very short notice expanding the definition of ultra-luxury vehicles and lowering the taxable price from CNY 1.3 million to CNY 900,000 (ex-VAT), putting additional pressure on European imports and further constraining domestic consumption. Source: Automotive Working Group Position Paper 2025/2026, European Union Chamber of Commerce in China, 17^th September 2025, viewed 28^th October 2025, p. 175, <https://europeanchamber.oss-cn-beijing.aliyuncs.com/upload/documents/documents/2025_Automotive_Working_Group%5b1366%5d.pdf>

[17] Unpublished data from the European Business in China Business Confidence Survey 2025.

[18] The divergence between the EU and Chinese definitions of SMEs, with the EU applying a lower size threshold, contributes to ongoing ambiguity.

[19] The European Chamber conducted a survey in August and September 2025, which revealed that there had been several production stoppages. One member, alongside its Chinese subsidiaries, had already suffered losses worth millions of euros

[20] Shanghai sets ambitious future industry goals for 2030, International Services Shanghai, 12^th October 2025, viewed 26^th October 2025, <https://english.shanghai.gov.cn/en-Policies/20251012/d271176fffa54b7aafc41df738f72ef6.html>

[21] Information and Communication Technology Working Group Position Paper 2025, European Union Chamber of Commerce in China, 17^th September 2025, viewed 3^rd November 2025, p. 307, <https://europeanchamber.oss-cn-beijing.aliyuncs.com/upload/documents/documents/2025_Information_and_Communication_Technology_Working_Group[1350].pdf>