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Guangdong province, China’s manufacturing heartland, has announced new measures to attract foreign investment.
On December 1, the Guangdong provincial government issued a report delineating 10 policies to expand the province’s openness to foreign investors and foreign capital.
The measures are in support of the State Council’s Measures to Expand Opening-up and Actively Utilize Foreign Investment (Guo Fa [2017] No. 5) and the Measures to Promote Foreign Capital Growth (Guo Fa [2017] No. 39). They include policies to improve Guangdong’s business environment, promote fair competition between foreign and domestic companies, expand market access and offer investment incentives.
The 10 measures for relaxing foreign investment:
1) Further expand market access, including relaxing ownership limits and/or operation scope in the following industries:
Special vehicle manufacturing;
New energy vehicle manufacturing;
Ship design;
Regional aircraft and general aircraft maintenance;
Human resources service agencies;
International maritime transport companies;
Railway passenger transport companies;
Construction and operation of gas stations;
Internet service and call centers;
Performance brokerages;
Brokerage, banking, securities, futures, and life insurance companies;
Law firms jointly owned by Hong Kong/Macau investors and domestic investors; and
Hong Kong/Macau airlines will be treated as special domestic airlines.
2) Increase the use of financial incentives for foreign investment for the 2017-2022 period, including:
For new projects worth more than US$50 million, replenishment projects worth more than US$30 million, and for multinational or regional headquarters worth at least US$10 million, the provincial government will give financial bonuses worth no less than two percent of the year’s actual investment amount, capped at RMB 100 million (US$15.1 million).
For Fortune 500 companies and leading global companies with actual investments (new projects or replenishment projects) in manufacturing worth over US$100 million in one year, and newly established IAB (new generation of information, automatic equipment, and bio-pharmaceuticals) and NEM (new energy, new material) projects with actual investments of no less than US$30 million in one year, the provincial government will provide financial support on a case-by-case basis.
For multinational or regional headquarters that contribute over RMB 10 million (US$1.5 million) to provincial revenue, 30 percent of the contributions will be awarded to the company in a lump sum payment, capped at RMB 10 million (US$1.5 million).
Local governments can provide other financial incentives based on provincial incentive standards.
3) Strengthen the use of land security, including land-use incentives for Fortune 500 companies, regional headquarters, and advanced factories.
4) Support innovation and research & development (R&D), including financial support for foreign R&D institutions and encourage participation in the development of public service platforms.
5) Increase financial support, particularly for Fortune 500 companies, global industry leaders, and cross-border mergers and acquisitions.
6) Strengthen personnel support, including incentives and visa conveniences for high-level foreign talent.
7) Strengthen the protection of intellectual property rights, including by accelerating the construction of the China (Guangdong) Intellectual Property Protection Center.
8) Enhance the level of investment and trade facilitation, including the full implementation of the Negative List and access to national treatment.
9) Optimize the environment for attracting foreign investment in key parks, including implementation of administrative streamlining in eligible development zones and other supportive policies.
10) Improve the use of foreign investment guarantee mechanisms, including setting up a coordinated mechanism to coordinate and solve the key problems that prevent investment in Guangdong.
The measures represent a step forward in boosting Guangdong’s competitiveness in attracting foreign investment. Although Guangdong is China’s richest province by GDP, and already one of the most open to foreign investment, rising labor and land costs have seen many businesses relocate their manufacturing operations to lower cost alternatives, such as Western China, Vietnam, and India.
Some areas in Guangdong have been successful in upgrading their local economies beyond low-value manufacturing. Most notably, Shenzhen has emerged as a hub for innovation and high-tech startups, and also boasts a robust financial sector.
Guangzhou has also had success in moving up the value chain, by producing higher-end goods like automobiles and high-tech products, while surrounding cities like Foshan have also benefited from regional integration and high-tech manufacturing.
The new measures reflect Guangdong’s continued desire to attract high quality capital-heavy investments; many of the policies specifically state a preference for Fortune 500 companies or recognizable industry leaders.
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