Since officially becoming part of the Chinese government’s twelfth Five-Year Plan, the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone has aimed to develop cooperation between the neighboring cities.
Dr. Witman Hung is the Managing Director at Qianhai International Liaison Services Ltd., set up by the Shenzhen Qianhai Management Authority in Hong Kong. In this role, he serves as the liaison to the Hong Kong business community.
“We are looking for innovations in six areas,” says Hung. “What does Qianhai bring to you? We have tax incentives, capital program, opportunities for development, an incubator center for entrepreneurs, and we try to have efficient and simple services as a government. It’s not an easy task.”
As of now, Qianhai has seemingly attracted more domestic Chinese companies to set up shop than Hong Kong companies to set up subsidiaries. Upon the AmCham delegation’s visit, with hulking buildings that have been built over the past year, it’s quickly apparent that the space is not being used to its full capacity. Hung and his fellow speakers answered questions on what can be done to attract more Hong Kong companies to the zone, and why it is strategically crucial for Hong Kong to seize the opportunity to expand its financial services across the border by leveraging Qianhai’s unique services.
“The Central Government has agreed that out of 21 different categories, we have 50 percent profit tanks for the corporations,” says Hung. “We also will allow you to nominate certain senior management members of that company registered in Qianhai to have a personal income tax or 50 percent equivalent. The person has to be a non-Chinese resident, either a Hong Konger or a foreigner. You still have to pay based on the monthly basis, but at the end of the year, you can apply and get a refund of tax, which makes it effective up to 15 percent. There is a name for it — the Senior Foreign Needed Talent Program.”
“What I see that Qianhai gives to Hong Kong comes in two forms,” says Hung. “One is capacity. We have more land, obviously, and we also have access to more talent. In Hong Kong, if you try to get some Mainland talents over, there are a lot of problems with working visas. But if you go to Qianhai, it’s easy to travel [back and forth] and it’s also simple for the local Chinese talents there. That’s an enhanced capacity for talent.”
“If you want to register a company in China, it’s easier to do in Qianhai geographically,” says Hung. “With the proximity to Hong Kong and languagewise, it’s a lot easier to get around. There are also certain policies where you can do certain things in Qianhai, whereas if you go somewhere else, you have hard time trying to apply for license.”
“This is a new pilot free trade zone, which was launched [in April],” says Hung. “Before there was this citizen equivalent tribune before the World Trade Organization. Basically what happens is in the old China, you have to apply for every single thing.”
Now, though, through Qianhai’s capacity for facilitation, the entire process is streamlined. “You can do whatever you want for business except for the [things] on the negative list. For those negative list items, you have to apply for special licenses and go through certain regulatory bodies, or there are certain restrictions in terms of foreign ownership share holdings. Unfortunately, the list is pretty long — about 150 right now. But it’s a big move from a positive list to a negative list. So in the future, all we have to do is to amend the list.”
Focus on E-Commerce
Xufei Ma, associate professor at the Department of Management and Associate Director of the Center for Entrepreneurship at the Chinese University of Hong Kong, has been watching the development of Qianhai and has been put in charge of CUHK’s collaboration with the Qianhai eHub.
“The huge market potential is strong growth in e-commerce,” Ma says. “We have cross border e commerce and the growth rate is significantly higher than the domestic growth. Top five product categories are: cosmetics, skin care, baby products, clothing and electronics. Those giants are moving cross-border in the e-commerce business field.”
“Initially, largely speaking, these traditional trading are B2B,” says Ma. “That’s why those national import and export productions companies were so weak. Regulations might be different, and the inspection and tax rate are significantly different, as well as the efficiency. They take about six months for this kind of inspection. But it only takes two weeks in Qianhai.”
“Why should you pay attention to cross border e commerce in Qianhai?” Ma asks. “It’s a fast way to further packaging China’s market. If you want to penetrate China’s market, it’s the right time and right place, especially for SMEs. If you still want to export your products in China and if you haven’t done it, use this type of business model and new place.”
“You can reach China’s consumers without any more tests, without tedious failings and taxation, without strong competition with local brands,” says Ma. “And again, with Qianhai’s location advantage, you will become an early bird.”