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5 Special Report on the State of Business in South China
micro-sized enterprises. e government has also adopted projects by banking institutions established in Qianhai;
speci c measures in terms of equity investment incentives, • Under the CEPA framework, conducting studies on the
e-commerce promotion and the introduction of electric
vehicles. Lastly, as part of a pilot program to curb emissions of granting of RMB loans by Hong Kong-based banking
key pollutants and clean up the environment, foreign investors institutions for enterprises and projects established in
are now permitted to trade carbon permits in Shenzhen. Qianhai;
• Supporting quali ed enterprises and nancial institu-
Equity Investment Incentives tions registered in Qianhai to issue RMB bonds in
Private equity (PE) investment has emerged as one of the Hong Kong within the quotas approved by the State
most important capital-raising avenues for small and medi- Council to support the development of Qianhai;
um-sized enterprises. Recognizing this, the Shenzhen govern- • Supporting the innovative development of foreign-in-
ment has become one of several coastal city administrations vested equity investment funds, and actively exploring
to o er further incentives to equity investment enterprises. new modes of foreign exchange settlement of capital
e city has established a PE Development Fund (PEDF) and funds, investment and fund management; and
clari ed operation procedures for PE funds that intend to ap- • Supporting the establishment of international or na-
ply for nancial support from the PEDF. Incentives o ered to tional management headquarters or business operation
PE funds include: rewards for local nancial contributions, headquarters by Hong Kong and other onshore and o -
o ce purchase and rental subsidies, one-time settlement re- shore nancial institutions.
wards, and one-time rewards for investment withdrawal.
Qualifying enterprises will be entitled to a reduced cor-
E-Commerce Promotion porate income tax rate of 15 percent and, to increase investor
In September 2009, Shenzhen was approved by China’s con dence in the area, the government has stated plans to ex-
NDRC and Ministry of Commerce (MOFCOM) to become plore the establishment of branches of Hong Kong arbitration
China’s rst “e-commerce model city”. In addition to stream- institutions in Qianhai. To attract foreign talent, especially -
lining registration processes for e-commerce companies, the nancial sector employees from Hong Kong, the zone o ers a
city has made other e orts to promote the development of special 15 percent salary tax rate for foreign nationals living or
e-commerce. One example is the building of dedicated indus- working in Qianhai. In April 2013 the municipal government
trial parks, such as Futian International E-commerce Indus- announced four industries– nance, modern logistics, infor-
trial Park, which opened in 2009 and houses more than 150 mation services, and related industries operating within the
internet and e-commerce companies. zone–that are eligible for special funds.
One state-level project being developed in Shenzhen is the
Qianhai Shenzhen-Hong Kong Modern Services Coopera- Identi ed as “an area for spearheading industrial restruc-
tion Zone, approved by the State Council in June 2012. By turing in the Pearl River Delta region,” the Qianhai Zone pro-
the end of April 2014, a total of 6,470 companies with a com- vides incentives that are likely to be extended to the other areas
bined registered capital of RMB 450 billion had already reg- in Guangdong Province in the near future. is is designed
istered in the zone. A joint venture between Hong Kong and to extract the ‘next wave’ of FDI in areas such as Hengqing
Mainland China, and supported by the State Council, the Island near Zhuhai and Nansha Port near Guangzhou, and if
Qianhai Zone is designed as an experimental business zone successful may eventually be instituted nationwide.
for better interaction between the two jurisdictions’ nancial,
logistics, and IT services sectors. It covers slightly less than Spotlight on Value-added Tax Reform
20 square kilometers on the western side of Shenzhen, and is Guangdong Province launched its value-added tax reform
expected to achieve a GDP of RMB150 billion by 2020.
Among its many goals, the Qianhai Zone will serve as a pilot program in November 2012, following the pilot program
pilot area for the liberalization of China’s nancial sector as a launch in Shanghai and Beijing. Here, two lower rates of 11
whole, including preferential policies such as: percent and 6 percent were added on to the standard rates of
17 percent and 13 percent under the previous value-added
• Allowing the Qianhai area to explore the expansion of tax regime. e tax rate of 17 percent applies to the leasing of
o shore RMB fund ow-back channels, and establish tangible movable property while that of 11 percent applies to
an innovative experimental zone for cross-border RMB the transportation industry.
business;
Industries included in the pilot include:
• Supporting the granting of RMB loans for o shore
• Land transportation service
50 • Water transportation service
• Air transportation service
micro-sized enterprises. e government has also adopted projects by banking institutions established in Qianhai;
speci c measures in terms of equity investment incentives, • Under the CEPA framework, conducting studies on the
e-commerce promotion and the introduction of electric
vehicles. Lastly, as part of a pilot program to curb emissions of granting of RMB loans by Hong Kong-based banking
key pollutants and clean up the environment, foreign investors institutions for enterprises and projects established in
are now permitted to trade carbon permits in Shenzhen. Qianhai;
• Supporting quali ed enterprises and nancial institu-
Equity Investment Incentives tions registered in Qianhai to issue RMB bonds in
Private equity (PE) investment has emerged as one of the Hong Kong within the quotas approved by the State
most important capital-raising avenues for small and medi- Council to support the development of Qianhai;
um-sized enterprises. Recognizing this, the Shenzhen govern- • Supporting the innovative development of foreign-in-
ment has become one of several coastal city administrations vested equity investment funds, and actively exploring
to o er further incentives to equity investment enterprises. new modes of foreign exchange settlement of capital
e city has established a PE Development Fund (PEDF) and funds, investment and fund management; and
clari ed operation procedures for PE funds that intend to ap- • Supporting the establishment of international or na-
ply for nancial support from the PEDF. Incentives o ered to tional management headquarters or business operation
PE funds include: rewards for local nancial contributions, headquarters by Hong Kong and other onshore and o -
o ce purchase and rental subsidies, one-time settlement re- shore nancial institutions.
wards, and one-time rewards for investment withdrawal.
Qualifying enterprises will be entitled to a reduced cor-
E-Commerce Promotion porate income tax rate of 15 percent and, to increase investor
In September 2009, Shenzhen was approved by China’s con dence in the area, the government has stated plans to ex-
NDRC and Ministry of Commerce (MOFCOM) to become plore the establishment of branches of Hong Kong arbitration
China’s rst “e-commerce model city”. In addition to stream- institutions in Qianhai. To attract foreign talent, especially -
lining registration processes for e-commerce companies, the nancial sector employees from Hong Kong, the zone o ers a
city has made other e orts to promote the development of special 15 percent salary tax rate for foreign nationals living or
e-commerce. One example is the building of dedicated indus- working in Qianhai. In April 2013 the municipal government
trial parks, such as Futian International E-commerce Indus- announced four industries– nance, modern logistics, infor-
trial Park, which opened in 2009 and houses more than 150 mation services, and related industries operating within the
internet and e-commerce companies. zone–that are eligible for special funds.
One state-level project being developed in Shenzhen is the
Qianhai Shenzhen-Hong Kong Modern Services Coopera- Identi ed as “an area for spearheading industrial restruc-
tion Zone, approved by the State Council in June 2012. By turing in the Pearl River Delta region,” the Qianhai Zone pro-
the end of April 2014, a total of 6,470 companies with a com- vides incentives that are likely to be extended to the other areas
bined registered capital of RMB 450 billion had already reg- in Guangdong Province in the near future. is is designed
istered in the zone. A joint venture between Hong Kong and to extract the ‘next wave’ of FDI in areas such as Hengqing
Mainland China, and supported by the State Council, the Island near Zhuhai and Nansha Port near Guangzhou, and if
Qianhai Zone is designed as an experimental business zone successful may eventually be instituted nationwide.
for better interaction between the two jurisdictions’ nancial,
logistics, and IT services sectors. It covers slightly less than Spotlight on Value-added Tax Reform
20 square kilometers on the western side of Shenzhen, and is Guangdong Province launched its value-added tax reform
expected to achieve a GDP of RMB150 billion by 2020.
Among its many goals, the Qianhai Zone will serve as a pilot program in November 2012, following the pilot program
pilot area for the liberalization of China’s nancial sector as a launch in Shanghai and Beijing. Here, two lower rates of 11
whole, including preferential policies such as: percent and 6 percent were added on to the standard rates of
17 percent and 13 percent under the previous value-added
• Allowing the Qianhai area to explore the expansion of tax regime. e tax rate of 17 percent applies to the leasing of
o shore RMB fund ow-back channels, and establish tangible movable property while that of 11 percent applies to
an innovative experimental zone for cross-border RMB the transportation industry.
business;
Industries included in the pilot include:
• Supporting the granting of RMB loans for o shore
• Land transportation service
50 • Water transportation service
• Air transportation service
