Qian­hai touts tax, land in­cen­tives to at­tract more in­vest­ment

New pol­icy an­nounce­ments likely to chan­nel more cap­i­tal from com­pa­nies based in Hong Kong

China Daily (Canada) - - BUSINESS - By LI XIANG in Beijing and FELIX GAO in Hong Kong

The Chi­nese main­land is ac­cel­er­at­ing the open­ing of its fi­nan­cial ser­vice in­dus­try, by of­fer­ing fa­vor­able land and tax poli­cies to at­tract more Hong Kong-based com­pa­nies to invest and op­er­ate in a business zone in Shen­zhen, Guang­dong prov­ince.

Known as Qian­hai Shen­zhen-Hong Kong Mod­ern Ser­vice Co­op­er­a­tion Zone, the $65 bil­lion project has been viewed as a test­ing ground for China to re­form its ser­vice in­dus­try and to fur­ther open the coun­try’s cap­i­tal mar­ket and to in­ter­na­tion­al­ize its cur­rency.

The Shen­zhen gov­ern­ment said that at least one-third of the zone’s land will be re­served forHong Kong com­pa­nies to build trad­ing fa­cil­i­ties for banks, se­cu­ri­ties bro­kers, in­sur­ers and mu­tual funds.

Em­ploy­ees from Hong Kong who have spe­cial skills and work at com­pa­nies es­tab­lished in the business zone will qual­ify for a lower tax rate.

The main­land will also ex­pand a pi­lot pro­gram­in­volv­ing cross-bor­deryuan­loans­made by Hong Kong-based banks to non-bank­ing fi­nan­cial in­sti­tu­tions, ac­cord­ing to Zhang Bei, di­rec­tor of theQian­hai ad­min­is­tra­tion.

“The pro­gram will cre­ate a chan­nel for off­shore yuan to flow back to the main­land, and will help ac­cel­er­ate China’s lib­er­al­iza­tion of the in­ter­est rate,” Zhang said at a news con­fer­ence in Beijing on Thurs­day.

Cross-bor­der yuan loans in Qian­hai have reached 73.8 bil­lion yuan ($12 bil­lion), and there were more than 10,000 fi­nan­cial com­pa­nies with op­er­a­tions in Qian­hai as ofNov 30, ac­cord­ing to the Shen­zhen gov­ern­ment.

Shen­zhen was China’s first spe­cial eco­nomic zone, known­for pi­lot­mar­ket re­forms in the 1980s that were later ap­plied across the coun­try.

The city may also of­fer Hong Kong com­pa­nies owned by main­lan­ders the sta­tus of do­mes­tic com­pa­nies in Qian­hai. Pre­vi­ously, Hong Kong-based com­pa­nies were treated as over­seas com­pa­nies.

The num­ber ofHong Kong-based com­pa­nies in Qian­hai is ex­pected to ex­ceed 1,000 with to­tal in­vest­ment of more than 160 bil­lion yuan by the end of this year, ac­cord­ing to the Shen­zhen gov­ern­ment.

The­move­todeep­en­busi­nesslinks­be­tween Shen­zhen andHongKong is part of the main­land’s ef­fort toal­lowHongKongto fur­ther tap into the main­land’s growth and main­tain its sta­bil­ity and pros­per­ity as a ma­jor fi­nan­cial hub of the coun­try, an­a­lysts said.

Pres­i­dent Xi Jin­ping said ear­lier this year that the Qian­hai project should serve as “a lever to pro­mote the struc­tural op­ti­miza­tion of Hong Kong and to fur­ther in­crease its con­nec­tiv­ity with the main­land”.

“We are de­vel­op­ing the business zone based on mar­ket-driven poli­cies, in­ter­na­tional stan­dards and the rule of law,” Wang Rong, the Party chief of Shen­zhen, said at the news con­fer­ence.

Kar­men Ye­ung Ka-yin, a China tax part­ner at ac­count­ing firm KPMG, said that cor­po­rate tax rate in Qian­hai is lower than any other main­land business zones, which is very at­trac­tive toHong Kong en­ter­prises.

He said that Qian­hai would be even more at­trac­tive to Hong Kong com­pa­nies if the the amount of cross-bor­der yuan loans in

Qian­hai as of Nov 30 tax on div­i­dends could be ex­empted.

Stan­ley Lau Chin-ho, deputy chair­man of the Fed­er­a­tion of Hong Kong In­dus­tries, said that the or­ga­ni­za­tion’s mem­bers have ex­pressed in­ter­est in Qian­hai, but con­crete de­tails on the zone’s ad­van­tages re­main un­clear, which has caused hes­i­ta­tion among Hong Kong com­pa­nies.

“Qian­hai could stream­line the formalities and make the ap­pli­ca­tion pro­ce­dure more sim­ple and con­ve­nient,” he said. Con­tact the writ­ers at lixang@ chi­nadaily.com.cn and fe­lix­gao@ chi­nadai­lyhk.com

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