Page 8 - THE SOUTH CHINA BUSINESS JOURNAL
P. 8
pth
work permit and residence permit valid for five In August, Guangdong announced that between 2018 and
years. They will also be entitled to local housing, 2020, it would invest over RMB 450 billion (US$65.65 billion)
education, medical care, and pension benefits in strategic and emerging industries. These industries include
and be able to employ foreign domestic workers, artificial intelligence, green technology, high-end equipment,
among other incentives. new materials, and biomedical technology, among others.
To allay foreign investors’ concerns over On September 10, provincial authorities announced cost-
intellectual property, the province will accelerate cutting measures that include reduced land use, electricity,
the development of the China (Guangdong) and social security rates, which are expected to reduce business
Intellectual Property Center, which it also pledged costs by over RMB 200 (US$29.18 billion) billion during the
to do last year. same time period.
Other measures to facilitate foreign investment, The raft of incentives that Guangdong has recently introduced
such as fully implementing the Negative List are partly designed to withstand the escalating trade war with
system to manage foreign investment, reducing the US. As China’s manufacturing heartland, Guangdong’s
investment approval items, and reducing the time economy is highly export-oriented – it accounts for nearly a
it takes for an approval by a quarter, are also listed third of China’s total exports – and therefore more vulnerable
in the plan. to tariffs. In August, Guangdong’s manufacturing sector
contracted for the first time in 29 months, according to the
Guangdong’s incentives to move up the value government’s purchasing managers index (PMI), which
chain, retain manufacturing power base dropped to 49.3.
Beyond the 10-point plan, Guangdong has recently However, though the timing of the measures may be in
released other measures to strengthen its economy. response to the trade war, they largely address structural
changes to the nature of Guangdong’s economy. After years
of rapidly rising land and labor costs in Guangdong, many
low-value manufacturers have been relocating to lower-cost
locations like inland China, Vietnam, and India.
Before the trade war officially started, Guangdong’s economy
was already showing symptoms of its structural pressures.
For example, through the first half of the year – before US
tariffs on Chinese products went into effect – exports had
already declined by 3.3 percent year-on-year. Meanwhile,
the government and firms that remain in the province are
embracing strategies to move up the value chain, by promoting
R&D in high-tech and investing in robotics and automation.
Taken together, many of Guangdong’s new incentives are
not designed to lessen the burden on smaller low-value
manufacturers that are the most vulnerable in the trade war.
Rather, they seek to expedite Guangdong’s transformation
into a high-tech manufacturing power by promoting the
development of the industries of the future and attracting
world-class talent.
As a result, the measures only serve to accelerate pre-existing
dynamics; promoting investment in emerging strategic industries
while leaving those most vulnerable to the trade war exposed
and potentially facing relocation and other financial stress.■
Article by China Briefing which is produced by Dezan Shira & Associates. The
firm assists foreign investors throughout Asia and maintains offices in China, Hong
Kong, Indonesia, Singapore, Russia, and Vietnam. Please contact info@dezshira.
com or visit www.dezshira.com.
6 AmCham South China
work permit and residence permit valid for five In August, Guangdong announced that between 2018 and
years. They will also be entitled to local housing, 2020, it would invest over RMB 450 billion (US$65.65 billion)
education, medical care, and pension benefits in strategic and emerging industries. These industries include
and be able to employ foreign domestic workers, artificial intelligence, green technology, high-end equipment,
among other incentives. new materials, and biomedical technology, among others.
To allay foreign investors’ concerns over On September 10, provincial authorities announced cost-
intellectual property, the province will accelerate cutting measures that include reduced land use, electricity,
the development of the China (Guangdong) and social security rates, which are expected to reduce business
Intellectual Property Center, which it also pledged costs by over RMB 200 (US$29.18 billion) billion during the
to do last year. same time period.
Other measures to facilitate foreign investment, The raft of incentives that Guangdong has recently introduced
such as fully implementing the Negative List are partly designed to withstand the escalating trade war with
system to manage foreign investment, reducing the US. As China’s manufacturing heartland, Guangdong’s
investment approval items, and reducing the time economy is highly export-oriented – it accounts for nearly a
it takes for an approval by a quarter, are also listed third of China’s total exports – and therefore more vulnerable
in the plan. to tariffs. In August, Guangdong’s manufacturing sector
contracted for the first time in 29 months, according to the
Guangdong’s incentives to move up the value government’s purchasing managers index (PMI), which
chain, retain manufacturing power base dropped to 49.3.
Beyond the 10-point plan, Guangdong has recently However, though the timing of the measures may be in
released other measures to strengthen its economy. response to the trade war, they largely address structural
changes to the nature of Guangdong’s economy. After years
of rapidly rising land and labor costs in Guangdong, many
low-value manufacturers have been relocating to lower-cost
locations like inland China, Vietnam, and India.
Before the trade war officially started, Guangdong’s economy
was already showing symptoms of its structural pressures.
For example, through the first half of the year – before US
tariffs on Chinese products went into effect – exports had
already declined by 3.3 percent year-on-year. Meanwhile,
the government and firms that remain in the province are
embracing strategies to move up the value chain, by promoting
R&D in high-tech and investing in robotics and automation.
Taken together, many of Guangdong’s new incentives are
not designed to lessen the burden on smaller low-value
manufacturers that are the most vulnerable in the trade war.
Rather, they seek to expedite Guangdong’s transformation
into a high-tech manufacturing power by promoting the
development of the industries of the future and attracting
world-class talent.
As a result, the measures only serve to accelerate pre-existing
dynamics; promoting investment in emerging strategic industries
while leaving those most vulnerable to the trade war exposed
and potentially facing relocation and other financial stress.■
Article by China Briefing which is produced by Dezan Shira & Associates. The
firm assists foreign investors throughout Asia and maintains offices in China, Hong
Kong, Indonesia, Singapore, Russia, and Vietnam. Please contact info@dezshira.
com or visit www.dezshira.com.
6 AmCham South China
