13 March 2014
Opportunities in China’s opening-up: the Qianhai test bed
Since the Overall Development Plan on Qianhai was endorsed by the Chinese State Council1, Qianhai2 has accelerated the pace of constructing various infrastructure and commercial facilities. Within the next year or so, companies registered in Qianhai are expected to gradually move in and start their business there. Although the zone does not yet have sufficient business facilities at the moment, over 3,000 mainland and Hong Kong companies have been attracted by its development plan to be registered there. Indeed, following the kick-off of some early and pilot innovative schemes, Qianhai now provides an actual operation platform for companies to accumulate practical experience in taking advantage of the zone’s innovative policy in the finance and other sectors. In the long run, Hong Kong and other companies’ experience in Qianhai is expected to help them tap various opportunities brought about by China’s further opening up to the outside world.
|Qianhai expedites building various infrastructure and commercial facilities. (Image courtesy of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone)|
Leading industries on fast-track expansion
The primary goal of Qianhai is to build itself into a demonstration zone for Guangdong-Hong Kong cooperation and innovation in modern service industry. By way of implementing an innovative modern service industry institutional mechanism and attracting a cluster of modern services, Qianhai aims to become a bridgehead of closer Hong Kong-mainland cooperation for driving the industrial upgrade of the Pearl River Delta region. It is projected that by 2020, a business environment and system conducive to the development of modern service sectors as well as a first-class international modern service industry cooperation zone will be put in place.
Qianhai covers an area of 14.92 sq km and its planned land use is primarily for commercial and service facilities. The zone focuses on expanding the four leading industries, namely (1) finance, (2) modern logistics, (3) information services, and (4) technology services and other professional services, and targets mainly corporate headquarters. According to Qianhai Authority’s statistics, up to the end of December 2013, a total of 3,553 enterprises were registered in Qianhai, representing a total registered capital of Rmb271.4 billion. Among them, 130 are Hong Kong-funded companies with a total registered capital of Rmb12.2 billion.
In terms of the number of enterprises registered in Qianhai, over half of them are engaged in financial services, thanks to the innovative financial policies implemented in the zone. A number of commercial banks like HSBC, Hang Seng Bank, Bank of East Asia, Standard Chartered Bank and China Merchants Bank have established branches in Qianhai. Among them, some have indicated they plan to develop cross-border renminbi (Rmb) business in Qianhai and accumulate more practical experience through participating in Qianhai loan projects3. [More….]
In addition, branches or subsidiaries of other types of financial institutions including insurance companies like Foresea Life Insurance and Anbang Insurance have also registered for business in Qianhai, with some of them gearing up to start operation there. In a bid to explore opportunities brought about by Qianhai’s financial innovations, other companies have also established and registered their subsidiaries in the zone, including asset management companies such as Franklin Templeton and Value Partners, as well as companies in the securities, fund management, financial leasing and small loans sectors. This development trend will bring benefits to Qianhai and facilitate the forming of a diversified financial industry cluster in the zone.
In addition, Qianhai also boasts a number of sizeable investment projects in other industries. For example, six companies under the renowned Tencent group have registered for business in Qianhai, which will reportedly make a total investment of over Rmb10 billion in internet-related and financial investment sectors in the next few years. Meanwhile, Cainiao Network Technology established jointly by the Alibaba group and its partners has announced plans to build and operate in Qianhai within the next several years a nationwide logistics infrastructure, which will include an intelligent backbone network capable of supporting an average daily online retail volume of Rmb30 billion.
Implementing early and pilot schemes
In accordance with the Qianhai Ordinance4 released and implemented since July 2011, the Qianhai Authority enjoys the administrative power equivalent to that of a city with separate planning status. It is vested with the authority to approve non-financial projects and streamline the relevant approval procedures, making it more convenient for companies to invest in Qianhai. In late June 2012, the State Council issued the Reply of the State Council on the Relevant Policies Supporting the Development and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen, setting out 22 policies of innovation covering the six key areas of finance, fiscal and tax matters, legal system, personnel, education and healthcare, and telecommunications.
To promote Qianhai’s industrial expansion, the relevant preferential policies are being implemented progressively. In the finance sector, for instance, cross-border Rmb loan projects were rolled out in early 2013. Meanwhile, under the CEPA framework and in a bid to encourage Hong Kong businessmen to invest in Qianhai5, permission is given to Hong Kong accountants who have qualified as Chinese Certified Public Accountants to become partners of partnership firms in Qianhai on a pilot basis, as well as to Hong Kong service suppliers to provide cross-border database services, set up joint ventures to engage in printing business and establish wholly-owned international schools.
Meanwhile, since the release of the permitted industry catalogue in Qianhai by the National Development and Reform Commission in March 20136, investors are looking forward to the publication of a preferential policies catalogue for the relevant industries, under which qualified enterprises will be entitled to a reduced 15% in enterprise income tax. While the tax concessions are yet to be implemented, the Qianhai Authority is already striving to launch further innovative policies in areas like cross-border Rmb business, securities and insurance to expedite Qianhai’s development.
Operation platform put into practice
In terms of Qianhai’s overall development, the zone is now stepping into a new era of actual business operation. Many companies have started their operation in Qianhai, making use of the various policies on innovation to run their business and plan for future development. Apart from some banks which have launched cross-border Rmb loan business, some modern logistics service firms are also studying offering in Qianhai logistics support services and establishing e-commerce platforms to provide more value-added services to mainland and overseas clients.7 [More….]
Some companies have also begun capitalising on the new legal environment in Qianhai. For instance, the Shenzhen Court of International Arbitration commenced operations in Qianhai last year and has compiled a register of arbitrators including arbitrators on the mainland, Hong Kong and overseas countries. In September 2013, it handled the first case of a Qianhai enterprise involved in overseas business dealings. Moreover, a number of companies have also started enquiring with the Qianhai Authority or initiating the relevant procedures with regard to bringing in talents from Hong Kong, Macau and overseas to prepare for business commencement once they move into Qianhai.
Although infrastructure and other facilities in Qianhai are still under construction and the majority of the registered companies have yet to move in, Qianhai is expediting the implementation of various policies of innovation to provide progressively a business environment for companies to launch actual operations. Looking ahead, the development of Qianhai will gather pace. In the long run, on-the-ground experience gained in Qianhai will help companies in tapping opportunities that are to emerge from Qianhai and other mainland regions as they further embark on policies of innovation and opening up.
1 The Chinese State Council endorsed the Overall Development Plan on Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in August 2010
2 Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone
3 For details, please refer to HKTDC Research article, Accumulating cross-border RMB business experience via Qianhai
4 Ordinance of Shenzhen Special Economic Zone on Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone
5 For details, please refer to the Mainland and Hong Kong Closer Economic Partnership Arrangement, Supplement IX to CEPA and other related arrangements
6 Circular of the National Development and Reform Commission on Publishing the Permitted Industry Catalogue for Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, 6 March 2013
7 For details, please refer to HKTDC Research article, Contemporary logistics opportunities in Qianhai