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Shanghai’s Resumption Of Work Procedure Reopening Of China’s Factories & Loosening Of The Supply China Bottleneck

In year two of the COVID-19 pandemic, China’s Disease Prevention Plan and border controls continue to evolve. The supply chain hurdles are growing. In light of recent lock downs across major Chinese cities, the government has formed a “White List” designed to support select businesses that are permitted to resume operations amid COVID-19 restrictions. The “White List” contains the names of factories permitted to resume production. At the end of April 2022, the first batch of names on the “White List” included 666 companies, 247 of which have foreign investment (Source: http://www.cgtn.com). As the process is strict and expensive, most small and medium businesses will likely wait for other opening procedures, which are expected June 1.

Companies looking to join the “White List” must comply with the requirements set in place by a newly empowered government sector. The application process considers a variety of factors, ranging from details about employees to the business’ actual operations and everything in between.

What is the process for applying to reopen?

All companies are permitted to apply for inclusion on the “White List”, though only some will be accepted. Inclusion on the “White List” does not guarantee immediate resumption of operations, but does place a company in a position to receive support while waiting to open and an increased likelihood of eventual reopening. A summary description of the phases of the approval process are set out below:

  • Gather company and employee information – for the preparation of government required documents
  • Criteria for application submission:
    • Is the company located within a “green area” (a safe area surrounding a factory)?
    • Does the company have a written Disease Prevention Plan for its facility? – Note: This is not required for leased offices.
    • Does the company have minimal finances?
    • Does the company meet manufacturing site requirements?
  • Create a “Checklist” of the confirmed documents and information required for submission – contact a relevant government agency as each district is different
  • Submit the application (structure outlined below)
  • Receive verification of submission
  • Await notification of approval
  • Start production
What are the details necessary to complete the application to reopen?
  • Company Summary
  • Company’s Affiliate Information
  • Explanation of the Company’s Current Situation
    • Employee List
    • Company Transportation Vehicles
    • Key Preparations to be made before opening
    • Company Promises
    • COVID-19 Disease Prevention Plan

Information and commitments are required by a company in order to obtain permission to reopen. The application’s structure includes:

These documents are lengthy and are expected to contain a lot of information. In addition to the application, companies should simultaneously apply for an Employee Pass and Vehicle Pass needed once the business reopens. These passes allow an employee and vehicle to participate in transportation on behalf of the company.

What are the factors considered to approve a resumption application?

Decisions to allow a company to open are based on the local government’s readiness and the company’s employee base and ability to be independent logistically.

The Municipal Commission of Economy and Informatization recently commented that companies demonstrating high relevance are more likely to be approved in the 1st and 2nd batches of “White List” businesses. For example, this would include companies providing logistical, utility and strategic functions, with significant large-scale economic importance, and that play a fundamental role in the supply chain. The Commerce Committee further commented that all foreign companies were invited to apply, especially those involved in commerce, services and trade with their headquarters locally as well as those involved in port type services.

How can a government application approval team assist a company?

Application teams are now being formed to provide support to companies seeking resumption of business. The teams consist of individuals who have experience in governmental affairs, writing effective Disease Prevention Plans, executive (management) team support, and communicating with different tiers of government offices. Through the team’s expertise, companies are offered government support of talent in the areas necessary to satisfy the application requirements.

Although restrictions continue to be reviewed and revised and the process is still in its early stage, it is vital for companies to understand the criteria that their reopening is dependent upon. The key is not to focus on “returning to normal”, but rather to forge a path forward in the newly developing commercial and governmental structures of China. For successful reentry into the market, businesses must strategically position themselves within China’s current priority spaces and demonstrate national relevance. Most importantly, a company’s ability to navigate application processes and government divisions will be key in finding success.

Recommendations
  • 1. Confirm if you meet the basic criteria
  • 2. Designate a person locally – either internally in the company or an external advisor –to negotiate with the government
  • 3. Gather the essential information and documents
  • 4. Understand the new local government representatives roles

Note: The information in this Update is from a Webinar hosted by Amcham Shanghai on Tuesday, May 17, 2022 (2-3 PM). The speaker was Dr. Haixiao (Hellen) Zhang, a Partner of Anjie Law Firm (Shanghai) and a part-time government legal adviser of the Municipal Commission of Commerce.

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Attorney Advertising. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.