Strategic positioning and objectives of Guangdong Free Trade Zone

The GFTZ was conceived to align with China’s broader initiatives, such as the Belt and Road and the GBA development plan. Its strategic location facilitates closer economic ties between mainland China and the Special Administrative Regions of Hong Kong and Macau. Each sub-zone has been designated specific roles:​

• Nansha: Focuses on advanced manufacturing, shipping logistics and financial services.​
• Qianhai and Shekou: Specialises in finance, modern logistics and technological innovation.​
• Hengqin: Targets tourism, leisure, healthcare, and cultural industries, leveraging its proximity to Macau.​

Policy innovations and incentives

The GFTZ has implemented a series of policy measures to foster a conducive business environment:​

• Trade and investment liberalisation: Adoption of a negative list approach allows foreign investors to operate in sectors not explicitly restricted. Simplified business registration processes and “one-stop” services have been introduced to expedite company setup.​
• Tax incentives: Eligible high-tech and modern service enterprises benefit from a reduced corporate income tax rate of 15%, compared to the national standard of 25%. Additionally, individual income tax subsidies are available for high-end talent in Qianhai and Nansha.​
• Financial services: Qianhai serves as a pilot area for cross-border financial services, including digital RMB trials. Foreign banks are permitted to establish wholly-owned subsidiaries, enhancing financial sector openness.​
• Technology and innovation: Support mechanisms such as intellectual property protections, R&D subsidies, and venture capital incentives are in place to encourage technological advancement.​
• Logistics and trade facilitation: The establishment of bonded warehouses and streamlined customs procedures, including a “single window” system, aims to enhance trade efficiency.​

Economic performance

Since its inception, the GFTZ has demonstrated robust economic growth. By 2023, the combined GDP of the three sub-zones reached approximately CNY 526 billion (£55.15 billion), more than doubling from CNY 224.4 billion (£23.51 billion) in 2015. Foreign trade within the zone surged from CNY 104.7 billion (£10.97 billion) in 2015 to CNY 580 billion (£60.78 billion) in 2023, reflecting an average annual growth rate of 24%. The actual utilisation of foreign capital totalled USD 53.9 billion (£41.22 billion) over this period, with an average annual increase of nearly USD 6 billion (£4.59 billion).​

In the first seven months of 2024, the GFTZ’s total import and export value reached CNY 409.56 billion (£42.91 billion), marking a 24.1% year-on-year increase. Machinery and electrical products accounted for over 60% of this trade, and commerce with ASEAN countries comprised nearly 20%.

Integration with Hong Kong and Macau

A key feature of the GFTZ is its role in fostering deeper economic integration with Hong Kong and Macau. In Hengqin, Macau enterprises can operate under Macau laws within designated areas, exemplifying the “one country, two systems” principle. Qianhai and Nansha offer preferential policies for Hong Kong firms, including lower thresholds for professional services and mutual recognition of qualifications.​

Future development plans

Looking ahead, the GFTZ aims to align more closely with international high-standard trade and economic rules, promoting institutional openness. Plans include the development of Nansha’s “Science City”, focusing on AI and biotechnology, pilot programs for blockchain and data trading, and infrastructure projects like the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hengqin-Macau Light Rail, expected to enhance regional connectivity.​

Conclusion

The Guangdong Free Trade Zone has emerged as a dynamic hub for economic reform and international trade. Its strategic initiatives and policy innovations have not only spurred regional growth but also set a precedent for future free trade zones in China. As it continues to evolve, the GFTZ is poised to play a pivotal role in China’s ongoing economic transformation and integration with global markets.

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The event saw the participation of over 200 delegates and provided a platform for more than 40 speakers, including senior representatives from the British Government and Greater Bay Area (GBA) local governments, and senior representatives from British and Chinese companies based in the UK, cities in the Chinese mainland, and Hong Kong.

Throughout the full-day programme, the discussions focused on the latest developments and strategies for British companies in the GBA region, covering topics ranging from data and technology to trade in services and goods. The conference also explored the potential for investment in the UK by Chinese companies from the region.

Sir Sherard Cowper-Coles, Chair of CBBC, delivering opening remarks at the UK-GBA Conference

In his opening remarks at the Morning Plenary Session, Sir Sherard Cowper-Coles, the Chair of CBBC, highlighted the abundant opportunities in the GBA, including enhanced connectivity, the size of the market, the depth of the talent pool and the policy incentives available. While acknowledging the challenges of establishing a major economic hub, he emphasised CBBC’s role in providing a platform for members to share their vision of the future of the GBA, saying, “CBBC has designed this conference to enhance understanding and awareness of opportunities and challenges, whether for UK business in the GBA or GBA companies looking to invest in the UK.”

Guangdong Governor Wang Weizhong delivering opening remarks at the UK-GBA Conference

Guangdong Governor Wang Weizhong, in a video message during the morning plenary session, said, “We hope that investors all over the world will seize the opportunity to come to China, Guangdong and the GBA to explore the Chinese market and achieve new accomplishments. Guangdong is willing to join hands with our friends from the UK to work closer under the framework of China-UK relations to realise mutual benefits on a higher level and with higher quality.”

Tom Simpson, Managing Director, China, China-Britain Business Council welcoming attendees

Also offering welcome remarks during the morning plenary session were Tom Simpson, Managing Director, China, China-Britain Business Council; Sarah Mann, Consul-General, British Consulate Guangzhou; Zhu Xiaojun, Deputy Director-General, Department of Commerce of Guangdong Province; and Dr Jimmy Chiang, Associate Director-General, Invest Hong Kong

The event continued with keynote speeches from three key speakers: ‘New Opportunities for International Cooperation in the Greater Bay Area (Qianhai)’ by Huang Xiaopeng, First Deputy Director-General, Qianhai Authority; ‘London – Technology, Innovation & Building Global Communities’ by Janet Coyle, CBE, Managing Director, Grow London at London & Partners; ‘Opportunities for Foreign Companies in the Greater Bay Area and HSBC’s Strategic Choices’ by Richard Li, Managing Director, External Relations, South China, HSBC; and ‘Transformation and Growth Through Uncertainty’, by Andrew Harding, FCMA, CGMA, Chief Executive, Management Accounting, AICPA & CIMA.

This was followed by two CBBC-moderated discussions on capitalising on the GBA’s potential for cross-border cooperation and the role British business can play in the development of a sustainable and economically diverse GBA integration strategy.

In the afternoon, attendees had the option to attend one of two sub-forums on ‘International Technology and Innovation Cooperation in the GBA’ and ‘Growth Beyond Borders: Expanding Your Business into the UK and Beyond’, respectively.

Wang Jinxia, Deputy Director General, Qianhai Authority, delivering the opening remarks at the ‘International Technology and Innovation Cooperation in the GBA’ Sub-Forum

Looking ahead, CBBC remains committed to building on the inaugural UK-Greater Bay Area Conference and investigating the future opportunities between the UK and the GBA.

Thank you to our partner, the Qianhai International Talent Hub; our gold sponsors, BSI, HSBC and London & Partners; our silver sponsors, AICPA & CIMA, Berkeley Group and the Welsh Government; and our supporting organisations, the British Chamber of Commerce Guangdong, the British Chamber of Commerce in Hong Kong, the Chinese General Chamber of Commerce Hong Kong, Invest Hong Kong, Guangdong Chamber of International Commerce, China Council for the Promotion of International Trade Shenzhen, China Chamber of International Commerce Zhuhai Chamber of Commerce, the Hong Kong Chamber of Commerce Qianhai and Shenzhen Outbound Alliance.

Click here to see more photos from the event

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What are the Welsh Government’s main goals in China?

We are promoting a wide range of priority sectors for Wales, including life sciences, high value manufacturing, education, food and drinks, and tourism, facilitating the development of trade links for our companies/institutions, and attracting more investments for Wales.

How does the Welsh Government go about reaching a Chinese audience?

In addition to joining promotional events like the UK-GBA Conference, we have set up collaborative partnership with the DBT, CBBC, Chinese governments and regional and national industrial association to promote Welsh industries and investment offers. Moreover, we believe that foreign direct investment (FDI) is led by sound trading partnerships, so we are trying hard to facilitate Welsh firms to export to China, and in this way to increase Welsh firms’ exposure in China, and indirectly promote the Welsh industrial ecosystem to the Chinese business community. We also run social media channels on WeChat, Weibo and Xiaohongshu.

How has China changed in recent years as a target market for investment, exports or FDI?

Due to geopolitical factors, we have seen a drop off among Chinese companies that want to establish R&D centres in Wales, as well as less investment in the tech sector.

What kind of industries is Wales trying to attract from China?

Life Science: We have over 360 Welsh-based life science companies with strengths in med tech, diagnostics, wound healing, regenerative medicine and cell therapy. Around 65% of them are in the medtech and diagnostics sub sector. That’s why we launched a medtech and diagnostics cluster in 2020 with a combined turnover of £1.5 billion. Some of the cluster members are proactively looking for investors to optimise their products and services and expand their sales channels. We also established 46 Centres of Excellence focusing on fields including oncology, neuroscience and imaging, wounds and diabetes, who are open for joint research collaborations.

Automotive: Wales has an established and diverse automotive industry with the supply chain capability to satisfy a wide range of requirements. The supply chain for ULEVs and certainly electric vehicles is very much in its infancy in the UK, but in Wales, we have a number of organisations specialising in power electronics, battery and energy technology, lightweighting and materials that have the potential to play a major role in the development of the industry. The compound semiconductor cluster in South Wales is also adding value, which is deployed across a growing number of applications, including electric and hybrid-electric vehicle motors and chargers, and RADAR and LIDAR for autonomous vehicles etc.

Why is the GBA important to Wales?

The Greater Bay Area is a region with high openness, a strong economy, and a great deal of strategic importance in China, characterised by innovation power and advanced engagement with international business. Meanwhile, both GBA and Wales share similarities in terms of industrial layout, with priority sectors including life science, advanced manufacturing, and information technology.

What is the Welsh Government’s strategy in the GBA?

This is very much a learning journey for the Welsh government, as we would like to learn more about the businesses in the Greater Bay Area, and specifically their requests to invest overseas, in order to better our service to accommodate and facilitate their business development. More importantly, we would like to put Wales on the map for all businesses in the GBA, and establish the business connection between Wales and GBA.

What do you hope to get out of this GBA conference?

We would like to further understand the industrial layout of the GBA, and identify opportunities for our companies/institutions in areas like trade and R&D. We also want to understand the need from GEA companies, especially from the investment perspective, and how we can optimise our service, and better support them expanding their business into the UK market.

Register now for the UK-GBA Conference in Shenzhen on Tuesday, 21 November

CBBC’s UK-GBA Conference, coinciding with the visit of CBBC’s Chair, Sir Sherard Cowper-Coles, and Chief Executive, Andrew Seaton, will provide a platform for senior-level representatives from our Members, partners, and other key stakeholders to discuss the latest developments and strategies for British companies in the GBA region. Also joining us will be representatives from the British Government, Shenzhen and other GBA local Governments, as well as representatives from British and Chinese companies in Guangdong, Hong Kong, Macau, and from other parts of China.

The post The surprising links between Wales and the Greater Bay Area appeared first on Focus - China Britain Business Council.

The hall at London’s Battersea Power Station is packed, full of start-ups, innovators, entrepreneurs, and scale-ups, all eager to absorb insights from the expert panel of tech companies, venture capitalists, investors, and futurists gracing the stage. This was the Future Horizons event, part of the annual Grow Summit presented by London and Partners. Speakers included executives from Mastercard, a16Z, Fidelity and other renowned entrepreneurs and business leaders such as Baroness Martha Lane-Fox of Soho, the co-founder of Lastminute.com, and Reid Hoffman, founder of LinkedIn.

Organisers London and Partners champion London as a rival to Silicon Valley, positioning it as a global investment hub with a strong emphasis on the tech industry.

Janet Coyle CBE, the organisation’s Managing Director of Business Growth, is heading to China to speak at the upcoming CBBC conference on the Greater Bay Area (GBA). She aims to attract the growing number of Chinese tech companies based in the GBA to invest in London.

“The GBA is by far generating the most opportunity. Fifty to sixty per cent of all our business comes from that area,” Coyle says. “We identify companies looking to expand into Europe, and we want them to choose London,” she adds. London and Partners is partly funded by the Greater London Authority, with the remaining funds self-sourced through sponsorships and events. Their primary goal is to draw investment into the capital, mostly through foreign direct investment (FDI) and by supporting companies looking to expand into London. They also attract and bid for major international business events and conferences, attract tourism, and assist London companies in going global.

Coyle acknowledges that recent geopolitical tensions have impacted London-based companies eyeing expansion into China. Still, she notes that Chinese interest in the UK remains strong.

For Coyle and her team, attracting Chinese companies to the capital is a complex and often slow process. Identifying suitable companies, understanding their needs, building relationships, and facilitating their launch in London can take years. Coyle cites Chinese FinTech company Ping Pong and electric car company BYD as recent high-profile successes.

Coyle explains that inbound Chinese investment slowed somewhat due to the Covid-induced pause and a focus on domestic growth keeping many companies from expanding abroad. However, she notes, “now we’re starting to see the momentum building. London is home to the second-highest number of Chinese companies after Singapore.

“Chinese companies want to come because of the business infrastructure, the talent, the innovation, and the available growth capital,” she emphasises. “Despite global trends, we are still seeing VCs investing, and London remains a great place to live, with a large Chinese community.”

Over the last six months, London and Partners has regularly connected scale-ups to corporates. Previously limited to London companies, their “meet the corporate” programmes are now open to any global scale-up.

“Whether it’s a company from Shanghai or Shoreditch, they all want the same things: access to customers, money, growth capital, talent, and ideally, access to new markets,” Coyle says. “If we’ve got a company from Shanghai interested in electric vehicles or wanting to connect with, for example, City Hall, we can now make that happen.”

While London and Partners is not a lobbying organisation and align with government decisions, they can assist Chinese tech companies in finding their feet in London, with a predominant focus on sustainability, enterprise, fintech, cyber, creative tech, and health tech or life sciences.

“What’s driving global FDI flow is sustainability right now,” Coyle states. “And wherever you go, including China, everyone is asking about sustainability. London is ranked number one globally for Green Finance.”

In addition to clean tech and sustainability, health tech, and mobility, there is a strong demand for creative tech – immersive, gaming, VR, AR – though Coyle admits that FinTech will always be strong for London.

“As a city, we have reinvented ourselves over hundreds of years and are used to it. Whether it’s Covid-19 or global downturns, we have incredible entrepreneurs who get us out of this and build incredible pieces of tech,” she concludes. “FinTech emerged from a huge crash, creating a new model for banking. London stands strong in times like this.”

The post Why GBA tech companies should invest in London appeared first on Focus - China Britain Business Council.

The Greater Bay Area (GBA), which covers nine municipalities of Guangdong Province (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing) around the Pearl River Delta, plus the two Special Administrative Zones (SAR) of Hong Kong and Macau, has long been a trading hub that connects China to the rest of the world.

For centuries, the trading posts at Lumen and Guangzhou welcomed traders from Europe, the Middle East, Africa, India and South East Asia. Even during the relatively isolationist Mao era, the Canton Fair (now known as the China Import and Export Fair) continued to host foreign merchants twice a year. In 1953, the famous Icebreaker Mission, led by the British economist Joan Robinson, travelled to Guangzhou to sign a business arrangement which ended the boycott imposed by the UN in response to the Korean War.

The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, published on 18 February 2019, set out a bold vision for a region that has long been one of China’s most dynamic and highest in potential. The plan proposed a far-reaching overhaul of the Pearl River Delta’s infrastructure and administrative set-up to expand on existing strengths and pave the way for further economic expansion.

The major cities of the Greater Bay Area

The region has developed rapidly since the release of the plan, despite the impacts of the Covid-19 pandemic, largely thanks to five main geographical and structural advantages:

1. The GBA hosts three of the world’s 10 busiest container ports — Shenzhen, Guangzhou and Hong Kong  (according to the World Shipping Council) — and has direct access to the South China Sea, which carries an estimated one-third of all global shipping.
2. Together with a sprawling network of waterways, the region has over 11,200km of express roads and a railway network the size of a small country, providing convenient and easy access to China’s vast consumer market.
3. The GBA is a key manufacturing hub, accounting for 35% of exports from mainland China, Hong Kong and Macau. Advanced manufacturing, in particular, is becoming a key area of investment, with the region seeing major growth in new energy industries such as lithium batteries and photovoltaics.
4. The region hosts some of the most innovative and technologically advanced companies on earth. In 2017, nearly 14% of all Chinese patents were filed by companies based in the GBA. Shenzhen alone accounted for over 40% of international patent applications from China.
5. Businesses in the delta can access three of the world’s leading financial centres. Aside from Hong Kong, which occupies fourth place on the Global Financial Centre Index, Shenzhen and Guangzhou, which come in at 9th and 25th respectively, represent two new emerging finance hubs.

The British business community is watching the development of the Greater Bay Area with great interest. For UK companies consider it to be an important driver for their Greater China operations, whether in financial services, technology and innovation, or other sectors.
Sir Sherard Cowper-Coles, Chair, China-Britain Business Council (CBBC)

Key areas of opportunity in the Greater Bay Area

Infrastructure 
There are few regions as well-networked as the GBA. Large-scale infrastructure projects, including the Hong Kong-Zhuhai-Macau Bridge, completed in 2018, and the express rail network that links Hong Kong to Shenzhen and Guangzhou and onwards to China’s vast high-speed rail network, have made it quick and easy to travel around the region, achieving a level of convenience that will only expand now the restrictions of the Covid-19 pandemic have been lifted. Green infrastructure – including low carbon transportation, green buildings, water and waste management, and more – is also a major part of the region’s current infrastructure boom, with green infrastructure investment accounting for RMB1.9 trillion of the total RMB 5 trillion earmarked for major infrastructure projects in Guangdong Province’s 14th Five-Year-Plan (FYP).

Advanced and high-tech manufacturing
According to the Department of Industry and Information Technology of Guangdong Province, in the first six months of 2022, advanced manufacturing and high-tech manufacturing accounted for 55.9% and 33.1%, respectively, of the industrial added value of the GBA. Key industries include electronic communication devices, automobiles, and chemical products. The growth of this sector in the GBA has been and will continue to be made possible by the provision of research funds, the construction of facilities such as high-tech industrial parks and national supercomputer centres, and the recruitment of human resources from around the world (for example, the Shenzhen Government has offered subsidies for undergraduates who move to Shenzhen). The establishment of cross-border “cooperation zones”, such as the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, has also played a key role.

In Hong Kong itself, the government has made unprecedented strides to promote information and technology development by investing more than HK$130 billion from 2017 to 2021. StartmeupHK, an initiative by InvestHK, also supports startup ecosystem stakeholder companies to set up a presence in Hong Kong, and provides a one-stop service platform to enable them to grow from Hong Kong into the wider GBA.

Financial Services
A growing economy and an increasingly affluent population have made the GBA an attractive market for financial services products. Hong Kong is already an international finance centre, with financial services accounting for 23.3% of the SAR’s GBP in 2020, and the GBA has enabled much greater connectivity between Hong Kong and mainland China’s capital markets. On 10 September 2021, the Cross-boundary Wealth Management Connect was officially launched to enable residents in Hong Kong, Macao and nine cities in Guangdong Province to carry out cross-border investment in wealth management products distributed by banks in the area. According to a January 2023 report published by Bain, SMEs in the GBA also present a substantial opportunity for financial services providers, requiring support for expansion “including more convenient lending, professional wealth management services, flexible insurance policies, and comprehensive cash and liquidity management.”

Register now for the UK-GBA Conference in Shenzhen on Tuesday, 21 November

CBBC’s UK-GBA Conference, coinciding with the visit of CBBC’s Chair, Sir Sherard Cowper-Coles, and Chief Executive, Andrew Seaton, will provide a platform for senior-level representatives from our Members, partners, and other key stakeholders to discuss the latest developments and strategies for British companies in the GBA region. Also joining us will also be representatives from the British Government, Shenzhen and other GBA local Governments, as well as representatives from British and Chinese companies in Guangdong, Hongkong, Macau, and from other parts of China.

The post Opportunities for UK businesses in the Greater Bay Area in 2023 appeared first on Focus - China Britain Business Council.

Cities in the Greater Bay Area (GBA), which links nine cities in Guangdong with Hong Kong and Macau, already present foreign businesses with subsidies based on the size of their investment and future contribution to the local economy with specific requirements and reward schemes varying on a municipality and sector basis.

Shenzhen is an excellent example of how the GBA plans to facilitate a business friendly-bureaucratic framework, encouraging multinational companies to establish regional headquarters in its sophisticated environment. If companies meet requirements regulating their local and overseas entities’ registered capital and management structure, the approved headquarters are entitled to a reward ranging from RMB 3-6 million (£346,000-692,000).

Over the last few years, Shenzhen has also laid out a series of provisions to simplify the overall company incorporation process, which includes shortening the time of business license issuance to a few working days and introducing company secretary virtual addresses and dormant company status. 

Investors aside, today Shenzhen is also one of the most attractive cities for local and international talents in the new technologies and logistics sectors. The Notice by the Ministry of Finance and the State Taxation Administration of the Preferential Individual Income Tax Policies for Guangdong-Hong Kong-Macao Greater Bay Area (No. 31 [2019] of the Ministry of Finance) has implemented an individual income tax (IIT) subsidy scheme aimed at foreign talents employed in the nine core cities of the GBA.

The policy aims to limit the total IIT burden for the fiscal year to 15% of the yearly taxable income, and provide a refund for the exceeding part when meeting a number of specific requirements set by each municipality taking part in the initiative from 1 January 2019 to 31 December 2023.

What corporate income tax benefits does the GBA offer?

Introduced nationwide via Announcement No. 24 [2017] of the State Administration of Taxation), a reduced corporate income tax (CIT) rate of 15% against the standard rate of 25% is granted to high-tech enterprises that are eligible for accreditation based on requirements that vary on a municipal level, based on:

• Establishment and business scope of the entity (i.e., encouraged industries of investment)
• IP protection and ownership
• Research and development-to-revenue ratio
• Personnel specialisation-to-total-organic ratio
• Innovation (graded system)
• Environmental protection

This regulation finds its best application in the GBA, where tech giants like Huawei, Tencent and Foxconn are based.

Startups and small or medium enterprises that might not fall into the above sectors or investment size can still benefit from the beneficial CIT rate granted by Article 2 of The Ministry of Finance and the State Administration of Taxation on the implementation of the inclusive tax relief policy for small and micro enterprises (Caishui [2021] No. 12). This halves the progressive enterprise income tax rate previously set by (Caishui [2019] No. 12) from January 1^st 2021 to December 31^st 2022.

Table 1: CIT tax rates for small and micro enterprises

The above tax treatment, implemented nationwide, would grant investors access to the GBA infrastructure and environment even when the investment volume and operations are limited during the startup period.

Understanding intellectual property rights in China

In 2020, China revised four IP-related laws and regulations (namely the Patent Law, Copyright Law, Criminal Law and the provision on the transfer of suspected criminal cases by administrative law enforcement organs); issued six judicial interpretations (covering commercial secrets infringement, application of laws in infringement disputes, and IP-related criminal cases); implemented more than twenty policies, and set two national standards for IP protection (related to IPR on e-commerce platforms and recommended national standards for patent guidance).

Through these continued efforts, China now ranks 14th among 131 economies according to the World Intellectual Property Organisation’s Global Innovation Index 2020. While ranking highly in patent registrations and total exports of creative products, China still needs to structure further reforms in areas like human capital, infrastructure, and institutional construction.

Navigating the protection of intellectual property in the Greater Bay Area

Among the challenges and opportunities of the GBA for foreign investors, the biggest might be navigating multiple municipal and regional jurisdictions. It is quite common for foreign investors to set up a Hong Kong holding company (under Hong Kong laws) for foreign exchange and tax purposes, and a PRC Wholly Foreign-Owned Enterprise (under PRC laws) 100% owned by the Hong Kong holding company for handling operations and the employment of local staff. While setting up entities in different jurisdictions can be a good strategy at the corporate level, it can create challenges for IP protection.

Beyond contractual or corporate matters, IPR territoriality is decisive. Apart from rare exceptions (such as so-called “well-known marks”), the registration of trademarks, patents or copyrights in one jurisdiction grants little to no other rights in other jurisdictions. Therefore, a rights owner’s IP protection strategy across the GBA must be assessed case by case according to the rights owner’s interests and anticipated use.

The table below outlines the main differences among the three jurisdictions within the GBA.

Table 2: Differences between the three jurisdictions

The GBA represents a privileged business destination for domestic and foreign companies operating in finance, logistics, innovation and technology, and capital-intensive industries. However, the differences in regulations among the three jurisdictions from legal, accounting and tax perspectives add a level of complexity.

In light of this, companies should carefully plan an entry strategy in the GBA, evaluating all the necessary resources and steps, including how to leverage synergies and incentives in the area, how to comply with the local tax requirements, and how to hire the right and qualified personnel, all the while protecting competitive advantage and key IPR. Working with a trusted partner with local expertise will help you better navigate China’s booming market.

The post How companies in the Greater Bay Area can access tax incentives appeared first on Focus - China Britain Business Council.

The Greater Bay Area (the area linking Hong Kong, Macau, and nine cities in mainland China around the Pearl River Delta including Guangdong and Shenzhen) was conceived as an integrated economic and commercial hub, designed to make doing business in the region easier.

While the GBA’s various free trade and high-tech zones do make it an attractive place to do business, understanding which preferential policies each one offers and which one is right for your business can be confusing. This article offers a brief explanation of each of the types of zones found in the GBA. However, it is worth noting that these definitions and the areas they apply to are subject to frequent change, so it is always best to check with an expert before embarking on a project in the GBA.

State-level new area 国家级新区

This is an urban area that has been given an “administrative readjustment” by the central government and receives preferential policies and privileges granted directly by the State Council. A new area is fairly small, geographically speaking, usually a designated district in a city. Through the establishment of a new area, the central government is signalling that it wants to drive the economic development of that particular area, alter its development trend and ultimately create a rippling economic impact.

China currently has 19 state-level new areas. In the Greater Bay Area, Guangzhou’s Nansha and Zhuhai’s Hengqin are New Areas. Others around the country include Shanghai’s Pudong New Area and Xiong’an in Hebei province, the newest, established in 2017.

Special economic zone 经济特区

This is the name given to the original experimental economic jurisdictions first introduced in the late 1970s at the beginning of reform and opening up. Shenzhen and Zhuhai were two of the earliest because they are located opposite the two SARs (Hong Kong and Macau). The scope and focus of SEZs vary, but most boast economic policies such as tax incentives for foreign investment and greater independence from the central government on international trade activities, and have a focus on export-oriented production.

Besides these, there are also Pilot Zones for Comprehensive Reforms (综合改革试验区). They are similar, but more focused on particular issues, such as coordinated development between urban and rural areas, or how to strike a balance between environmental protection and economic development.

Economic & technological development zone 经济技术开发区

These are zones that are set up to follow particular industrial development trends in the context of regional development. They became popular in the late 1980s and the early 1990s when the government tried to group companies into industrial clusters. Enterprises in the development zones are granted preferential policies for land usage or tax deductions.

China has a total of 219 state-level economic and technological development zones. Jiangsu province leads with 26, followed by 21 in Zhejiang and 15 in Shandong.

Guangdong has six, located in Zhanjiang, Guangzhou, Nansha, Daya Bay (Huizhou), Zengcheng (Guangzhou) and Zhuhai.

High-tech zone 高新区

High-tech industries have always had plenty of government support. The Ministry of Science and Technology is highly involved in the development of these zones, often providing detailed guidelines on which high-tech zone should focus on which sector.

Each of the nine mainland GBA cities has a state-level high-tech zone. The one in Shenzhen’s Nanshan district is ranked second only to Beijing’s Zhongguancun (often called China’s Silicon Valley and the birthplace of companies like Lenovo) among China’s 157 state-level high-tech zones. Shenzhen’s aims to focus on four industries, namely electronic information, bioengineering, new materials and opto-mechatronics.

Dongguan’s Songshan Lake Hi-Tech Zone is seen as an up-and-coming star. It focuses on high-end electronic information, biopharmaceuticals, robotics, new energy and modern service industries

Guangzhou is no slouch, either. Its high-tech zone in the east of the city was established in 1991 and currently ranks ninth nationally. It is home to Guangzhou Science City, Guangzhou Tianhe Software Park, Huanghuagang Technology Park, Non-Governmental High-tech Park and Nansha IT Technology Park.

Dongguan’s Songshan Lake Hi-Tech Zone is seen as an up-and-coming star. It focuses on high-end electronic information, biopharmaceuticals, robotics, new energy and modern service industries. Foshan’s Hi-Tech Zone specialises in automobile and component manufacturing, high-end equipment manufacturing, new materials, smart home appliances, life sciences and optoelectronic technology.

Free trade zone 自贸区

Free trade zones are generally province-sized areas — Guangdong is a Free Trade Zone, for example — and are not necessarily as free as the name implies, i.e. regulations related to tariffs, approvals and management are flexible, not free.

Twelve of China’s provinces are currently designated as Free Trade Zones, including Shanghai, Guangdong, Tianjin, Fujian, Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan, Shanxi and Hainan.

That being said, it is not the whole province that implements this flexibility. Guangdong’s zone actually only includes three districts: Guangzhou’s Nansha, Shenzhen’s Qianhai and Zhuhai’s Hengqin.

This post originally appeared on our content partner Greater Bay Insight

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To sustain continued, robust economic growth – something of crucial importance to its legitimacy and stability – the Chinese government has lately employed a bold stimulus plan of “city grouping” (chengshiqun), the creation of a few megacities by integrating groups of cities and nearby rural areas. So far, Beijing has decreed that four “world-class” megacities should be formed: the Jingjinji Integration (2015) in the north, which includes Beijing, Tianjin, and Hebei Province (population: 110 million); the Chengdu-Chongqing City Group (2016) in the west, with 18 cities (population: 91 million); the Yangtze Delta City Group (2016) in the east that includes Shanghai and two dozen other cities in three provinces (population: 150 million); and the latest, the Greater Bay Area (2019) in the south, with nine cities that include Hong Kong, Macao, Shenzhen, and Guangzhou (population: 70 million). In addition, seven cross-provincial “national” megalopolises were also approved in 2017-18, with a total population of around 410 million: The Middle Yangtze, The Central-Plains, The Harbin-Changchun, The Beibu Gulf, The Guanzhong Plains, The Hubaoeryu, and The Lanzhou-Xining.

China’s megacities

City grouping is an example of central planning with key Chinese characteristics. It focuses on the economically prosperous and politically important regions and in it, one can see some vestiges of the “Major Region” (daqu) structure of governance and planning from the Mao era. It also allows for economies of scale to come into play. Efficient chains of production and logistic networks have already been extensively developed among the cities in these areas, and even more synergy and streamlining is likely to be harvested by further integration. It’s also worth noting that the Greater Bay Area’s design may have an additional political motive: a tighter control over the two wealthy but occasionally politically complex Special Administrative Regions (SARs) of Hong Kong and Macao.

It may be somewhat self-evident, but if the megacities can elevate themselves onto the next level of economic development, there would be enough of a boost to lift the boat of the whole Chinese economy

There are more peculiar motives as well. The megacity push reflects Beijing’s sometimes contradictory needs to maintain strong political control while stimulating the economy. It is a way to uphold the all-important household registration (hukou) system that segregates and controls the people by regulating internal migration whilst simultaneously increasing the mobility of resources, including labour and homebuyers, so as to generate new growth. By giving the most desirable first- and second-tier cities more towns to expand into, the influx of migrant “low-end people” into the glittering urban centres may be more reliably diverted and managed, while ensuring the continuation of economically beneficial urbanisation.

China’s Jingjinji Megacity area

It may be somewhat self-evident, but if the megacities, each comparable to a major EU member country in size, can elevate themselves onto the next level of economic development whilst avoiding the so-called “middle-income trap,” there would be enough of a boost to lift the boat of the whole Chinese economy, even though the rest of the country (up to three-fifths of the population) may be left behind. To be sure, China’s impressive economic growth over the past three decades has been an extraordinary model of a dual-economy and multiple societies functioning under a single government.

As it is now politically favoured, just about every provincial capital has been expanding massively to “absorb” nearby cities and counties

Like so many other central planning policies though, the devil of the megacity plan is in the detail. The plan is mostly an “administrative urbanisation” that may only lead to minimal economic advantages, if any are forthcoming at all. Urbanisation through official re-categorisation or renaming of people from rural to urban, or from lower-tier towns to higher-tier cities, is not the same as urbanisation driven by market forces. Within each megacity, there are also still numerous control mechanisms and exclusion barriers based on where one’s hukou is located:  the “central districts,” the “non-central districts,” the “remote districts” (formerly county-seats and townships), and the rural.

As it is now politically favoured, city-grouping has been emulated throughout China. Just about every provincial capital, for example, has been expanding massively to “absorb” nearby cities and counties, renaming them city districts. The national megacities and the many more “regional” mini-megacities, both inter- and intra-provincial, may make the report cards of the local governments look nice in terms of GDP figures, growth rate, and the urbanisation ratio. But the real impact on economic efficiency remains questionable. The scheme has allowed for land grabs by local officials and their contractor friends. Bureaucratic re-categorisation of regions and ever greater concentrations of power have already led to waste, irrational resource allocation, and reduced competition and innovation, contrary to the optimistic ambitions behind the plan.

The Greater Bay Area

The Greater Bay plan may bring an additional pitfall for those in Hong Kong and Macao: as they witness more complete administrative integration of the two SARs with the PRC, foreign countries like the United States may find themselves reconsidering their special treatment of the two cities, causing the “value” of the SAR brand to evaporate quickly.

Fei-Ling Wang is Professor of International Affairs at the Georgia Institute of Technology and a member of the Council on Foreign Relations, USA. His published books include Organization through Division and Exclusion: China’s Hukou System (Stanford University Press, 2005) and The China Order: Centralia, World Empire, and the Nature of Chinese Power (State University of New York Press, 2017).

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