Policies Designed to Encourage Innovation in Qianhai
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The policy-making process in Qianhai has proven to be an ongoing endeavor for the Authority. Seventeen out of twenty-two pilot policies have been implemented since The Plan was first published. It remains a challenge, however, for most overseas enterprises - including Hong Kong-based firms – to operate in China due to policy risks. For example, details of the tax rate incentive, which is an essential item of the twenty-two pilot policies, were recently announced, revealing that the finance industry won’t be allowed to benefit from the 15% corporate tax rate, despite the fact that up to 60% of the 6,000 registered firms in Qianhai are finance-related.
As the Central Government continues totransform its structure, risk-takers seem to be benefiting the most. The concept of Qianhai has been supported by the government and The Plan has, for the most part, been followed. Whether the finance industry has been singled out appears doubtful. In fact, the sector has benefitted from a variety of ‘innovation incentives’ which were released at the beginning of 2014. It is believed that the finance industry’s exclusion from the tax benefit is intended to encourage the formation of an alliance between the finance industry and other sectors, such as I.T. If such a mechanism works, the 15% corporate tax rate would benefit the finance industry indirectly.
In January 2014, China issued the first batch of private banking licenses. Tencent, the largest Internet service company listed on the Hong Kong Stock Exchange, was one of the enterprises approved for the license. The company is expected to combine its current popular app ‘WeChat’ and its online payment system to provide clients with easier and faster transactions. So far, this model is experimental, but it indicates the government’s intention of encouraging corporate innovation.
Additionally, the fact that the finance industry was not mentioned at all when Qianhai released the list of industries entitled to the preferential corporate income tax, may imply that the Authority could introduce more preferential policies for the sector at a later stage. Colliers believes more government incentives are certain to follow as the Central Government works to bolster this pillar industry and develop a channel allowing RMB to easily flow to and from on-and offshore markets.
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