Much shorter waits in the future for opening.
On November 23, 4 enterprises in Pudong were issued with an industry comprehensive license in the form of immediate approval for operation upon commitment (“New System”), marking the official launch of the pilot of the New System in Pudong New District.
Saving opening time
Previously, to open a cinema, for example, you needed to first apply for a variety of licenses (screening license, health license, food safety license, etc.), a process that could take a month or more. Through this New System, though, you can get an industry comprehensive license covering all of those business functions on the same day you submit the commitment letter, saving significant time and effort for a business planning to open.
10 pilot industries
For the pilot program of the New System, the first batch of the market entities allowed to apply include 10 high-frequency industries: convenience stores, supermarkets, restaurants, cafes, bakeries, beverage stores, mom-and-pop stores, cinemas (excluding foreign investment), bookstores (retail), and gyms. The enterprises entering the pilot channel are mostly large enterprises or chains with better credit, and eligibility is based on two indicators: public credit and industry credit. The coverage will be gradually expanded in the following years.
Main contents of the commitment letter
The commitment letter is usually divided into two parts: “Notice of Administrative Approval Authority” and “Applicant’s Commitment”. We describe the basic elements below.
Take a commitment letter for opening a new bookstore as an example. The “Administrative Approval Authority’s Notice” portion lists contents to be approved, legal basis for approval, conditions for granting license, duration and effectiveness of the commitment, legal liability, etc.. The legal liability portion should clearly specify that within 5 working days before the opening of an enterprise, the approval authorities will conduct joint inspection on whether the commitments made by the enterprise are authentic. If there are any inconsistencies, the approval authorities will require the enterprise to rectify within certain period. If the enterprise refuses to rectify or still does not meet the conditions after the rectification period, the administrative grant of the license will be revoked.
In addition, during the follow-up supervision by the administrative approval authorities, if any violation of the commitment is found, and the violation results in actual harm, a fine between RMB 10,000 and 100,000 will be imposed on the enterprise; if the harm is deemed serious, the fines can range from to RMB 100,000 to 300,000.
The New System is essentially a reform based on market needs. Enterprises can quickly and easily obtain authorization to operate, as long as they commit to meeting various conditions before opening. Please note that the pilot program of the New System is only currently available in Pudong and the Lin-gang Special Area.
Additionally, the application of the New System does not mean that regulators will not conduct inspections on enterprises that have made commitments. Especially for key issues related to safety and health (such as fire safety issues, etc.), the authorities will still conduct inspections and require rectification or impose appropriate penalties on enterprises that do not meet the requirements.
DaWo has extensive experience with assisting foreign investors in incorporating companies and local branches in Shanghai and across China. If you are looking to start your business in China, don’t hesitate to reach out to us.