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5 White Paper on the Business Environment in China
rapid private economic growth, spawning about 450,000 • Allowing the Qianhai area to explore the expansion
private companies, including international behemoths such of offshore RMB fund flow-back channels, and
as Huawei Technologies Co Ltd, Tencent Holdings Ltd, establish an innovative experimental zone for cross-
China Vanke Co Ltd and BYD. Available incentives include a border RMB business;
recent VAT and business tax exemption policy for small and
micro-sized enterprises. e government has also adopted • Supporting the granting of RMB loans for offshore
speci c measures in terms of equity investment incentives, projects by banking institutions established in
e-commerce promotion and the introduction of electric Qianhai;
vehicles. Lastly, as part of a pilot program to curb emissions of
key pollutants and clean up the environment, foreign investors • Under the CEPA framework, conducting studies on
are now permitted to trade carbon permits in Shenzhen. the granting of RMB loans by Hong Kong-based
banking institutions for enterprises and projects
Equity Investment Incentives established in Qianhai;
Private equity (PE) investment has emerged as one of the
most important capital-raising avenues for small and medium- • Supporting qualified enterprises and financial
sized enterprises. Recognizing this, the Shenzhen government institutions registered in Qianhai to issue RMB
has become one of several coastal city administrations to o er bonds in Hong Kong within the quotas approved
further incentives to equity investment enterprises. e city by the State Council to support the development of
has established a PE Development Fund (PEDF) and clari ed Qianhai;
operation procedures for PE funds that intend to apply for
nancial support from the PEDF. Incentives o ered to PE • Supporting the innovative development of foreign-
funds include: rewards for local nancial contributions, o ce invested equity investment funds, and actively
purchase and rental subsidies, one-time settlement rewards, exploring new modes of foreign exchange settlement of
and one-time rewards for investment withdrawal. capital funds, investment and fund management; and
E-Commerce Promotion • Supporting the establishment of international or
In September 2009, Shenzhen was approved by China’s national management headquarters or business
NDRC and Ministry of Commerce (MOFCOM) to become operation headquarters by Hong Kong and other
China’s rst “e-commerce model city”. In addition to onshore and offshore financial institutions.
streamlining registration processes for e-commerce companies,
the city has made other e orts to promote the development Qualifying enterprises will be entitled to a reduced
of e-commerce. One example is the building of dedicated corporate income tax rate of 15 percent and, to increase
industrial parks, such as Futian International E-commerce investor con dence in the area, the government has stated
Industrial Park, which opened in 2009 and houses more than plans to explore the establishment of branches of Hong Kong
150 internet and e-commerce companies. arbitration institutions in Qianhai. To attract foreign talent,
One state-level project being developed in Shenzhen is the especially nancial sector employees from Hong Kong, the
Qianhai Shenzhen-Hong Kong Modern Services Cooperation zone o ers a special 15 percent salary tax rate for foreign
Zone, approved by the State Council in June 2012. By the end nationals living or working in Qianhai. In April 2013 the
of April 2014, a total of 6,470 companies with a combined municipal government announced four industries– nance,
registered capital of RMB 450 billion had already registered in modern logistics, information services, and related industries
the zone. A joint venture between Hong Kong and Mainland operating within the zone–that are eligible for special funds.
China, and supported by the State Council, the Qianhai
Zone is designed as an experimental business zone for better Identi ed as “an area for spearheading industrial
interaction between the two jurisdictions’ nancial, logistics, restructuring in the Pearl River Delta region,” the Qianhai
and IT services sectors. It covers slightly less than 20 square Zone provides incentives that are likely to be extended to
kilometers on the western side of Shenzhen, and is expected the other areas in Guangdong Province in the near future.
to achieve a GDP of RMB150 billion by 2020.
Among its many goals, the Qianhai Zone will serve as a is is designed to extract the ‘next wave’ of FDI in areas
pilot area for the liberalization of China’s nancial sector as a such as Hengqing Island near Zhuhai and Nansha Port near
whole, including preferential policies such as: Guangzhou, and if successful may eventually be instituted
nationwide.
242
Spotlight on Value-added Tax Reform
Guangdong Province launched its value-added tax reform
pilot program in November 2012, following the pilot program
launch in Shanghai and Beijing. Here, two lower rates of 11
percent and 6 percent were added on to the standard rates of
17 percent and 13 percent under the previous value-added
rapid private economic growth, spawning about 450,000 • Allowing the Qianhai area to explore the expansion
private companies, including international behemoths such of offshore RMB fund flow-back channels, and
as Huawei Technologies Co Ltd, Tencent Holdings Ltd, establish an innovative experimental zone for cross-
China Vanke Co Ltd and BYD. Available incentives include a border RMB business;
recent VAT and business tax exemption policy for small and
micro-sized enterprises. e government has also adopted • Supporting the granting of RMB loans for offshore
speci c measures in terms of equity investment incentives, projects by banking institutions established in
e-commerce promotion and the introduction of electric Qianhai;
vehicles. Lastly, as part of a pilot program to curb emissions of
key pollutants and clean up the environment, foreign investors • Under the CEPA framework, conducting studies on
are now permitted to trade carbon permits in Shenzhen. the granting of RMB loans by Hong Kong-based
banking institutions for enterprises and projects
Equity Investment Incentives established in Qianhai;
Private equity (PE) investment has emerged as one of the
most important capital-raising avenues for small and medium- • Supporting qualified enterprises and financial
sized enterprises. Recognizing this, the Shenzhen government institutions registered in Qianhai to issue RMB
has become one of several coastal city administrations to o er bonds in Hong Kong within the quotas approved
further incentives to equity investment enterprises. e city by the State Council to support the development of
has established a PE Development Fund (PEDF) and clari ed Qianhai;
operation procedures for PE funds that intend to apply for
nancial support from the PEDF. Incentives o ered to PE • Supporting the innovative development of foreign-
funds include: rewards for local nancial contributions, o ce invested equity investment funds, and actively
purchase and rental subsidies, one-time settlement rewards, exploring new modes of foreign exchange settlement of
and one-time rewards for investment withdrawal. capital funds, investment and fund management; and
E-Commerce Promotion • Supporting the establishment of international or
In September 2009, Shenzhen was approved by China’s national management headquarters or business
NDRC and Ministry of Commerce (MOFCOM) to become operation headquarters by Hong Kong and other
China’s rst “e-commerce model city”. In addition to onshore and offshore financial institutions.
streamlining registration processes for e-commerce companies,
the city has made other e orts to promote the development Qualifying enterprises will be entitled to a reduced
of e-commerce. One example is the building of dedicated corporate income tax rate of 15 percent and, to increase
industrial parks, such as Futian International E-commerce investor con dence in the area, the government has stated
Industrial Park, which opened in 2009 and houses more than plans to explore the establishment of branches of Hong Kong
150 internet and e-commerce companies. arbitration institutions in Qianhai. To attract foreign talent,
One state-level project being developed in Shenzhen is the especially nancial sector employees from Hong Kong, the
Qianhai Shenzhen-Hong Kong Modern Services Cooperation zone o ers a special 15 percent salary tax rate for foreign
Zone, approved by the State Council in June 2012. By the end nationals living or working in Qianhai. In April 2013 the
of April 2014, a total of 6,470 companies with a combined municipal government announced four industries– nance,
registered capital of RMB 450 billion had already registered in modern logistics, information services, and related industries
the zone. A joint venture between Hong Kong and Mainland operating within the zone–that are eligible for special funds.
China, and supported by the State Council, the Qianhai
Zone is designed as an experimental business zone for better Identi ed as “an area for spearheading industrial
interaction between the two jurisdictions’ nancial, logistics, restructuring in the Pearl River Delta region,” the Qianhai
and IT services sectors. It covers slightly less than 20 square Zone provides incentives that are likely to be extended to
kilometers on the western side of Shenzhen, and is expected the other areas in Guangdong Province in the near future.
to achieve a GDP of RMB150 billion by 2020.
Among its many goals, the Qianhai Zone will serve as a is is designed to extract the ‘next wave’ of FDI in areas
pilot area for the liberalization of China’s nancial sector as a such as Hengqing Island near Zhuhai and Nansha Port near
whole, including preferential policies such as: Guangzhou, and if successful may eventually be instituted
nationwide.
242
Spotlight on Value-added Tax Reform
Guangdong Province launched its value-added tax reform
pilot program in November 2012, following the pilot program
launch in Shanghai and Beijing. Here, two lower rates of 11
percent and 6 percent were added on to the standard rates of
17 percent and 13 percent under the previous value-added
