Shanghai is encouraging its enterprises to polish their global profiles by investing directly into overseas markets to try to build more locally-based multinational giants.

The municipal government said Monday that it has rolled out a new set of guidelines giving preference to local companies with plans to invest in foreign countries or regions.

"The new regulation encourages companies with different shareholding structures, including state-owned enterprises, private firms and joint ventures, to set up companies in the overseas marketplace," said Jiang Yingshi, director of Shanghai Development and Reform Commission. "The local government will relax the rules for such moves."

The State Administration of Foreign Exchange has recently permitted Shanghai-based enterprises with large overseas investments to apply to buy more foreign currency than the US$200 million limit. China has strict control on both enterprises and individuals' purchase of foreign currency to maintain a safe financial status.

The Shanghai municipality is also working with different government departments to ensure that qualified local enterprises can carry out globalization programs more easily.

Such incentives include providing timely overseas market information to local companies, easing passport application procedures for locals who will be assigned to work in local enterprises' foreign subsidiaries and arranging special government funds to finance ambitious local companies, said Jiang.

Shanghai-headquartered enterprises had direct investments worth more than US$1 billion in overseas markets by the end of last year, or 9 percent of the country's total similar investment, according to the municipality.

"The amount of direct overseas investment by local companies in the recent three years was 1.08 times that of the past two decades," said Zhou Yupeng, vice mayor of Shanghai.

"We hope that the annual growth of direct overseas investment can reach 50 percent between 2004 and 2007," he said.

Meanwhile, local enterprises do benefit from their global expansion strategies, most of which have been carried out since 2000 when the city government urged local companies to invest directly in overseas economies for the first time.

Shanghai Baosteel Group Corp said that its 11 overseas companies, set up as joint ventures or wholly-owned firms in overseas markets, earned revenues of US$1.83 billion last year, compared with a total sales volume of US$13.87 billion in the group during the same period.

"By investing in setting up companies overseas, we can have a stronger voice in the global market," a Baosteel official said. "The overseas subsidiaries can also help us attract global talents and provide products in line with global demands."

Some local companies also take advantage of overseas manufacturing to beat trade barriers in some countries.

SVA Group, a Shanghai-based information technology maker, has set up a television plant in Bulgaria, selling SVA-branded TV sets in Europe.

In contrast, only 400,000 made-in-China color TV sets are allowed by the European Union to be sold in the European market annually.

"By involving in the global market more actively, we can play on a bigger and fairer stage," said Chen Hong, a senior official of SVA.

The Shanghai government also urges the city enterprises to focus on buying out technology research and development centers in foreign companies when they are acquiring the overseas counterparts in the future in a bid to get more returns from their overseas investment.

(Shanghai Daily March 2, 2004)