Guangdong business setup has long been a popular choice among foreign investors. It is reported that China’s Guangdong province announced a series of investment incentives and cost-cutting measures to offset the impact of the worsening trade war with the US on September 13. The measures include a 10-point plan to attract foreign investment by opening market access, offering talent and land-use incentives, supporting R&D, and strengthening intellectual property (IP) protection.
Most importantly, the plan allows foreign investors to set up wholly foreign-owned enterprises (WFOE) to produce special-purpose and new energy vehicles, drones, aircraft, and other high-tech industries where joint ventures were previously required.
Further Market Opening
The 10-point plan calls for Guangdong to fully implement the 2018 update to the Foreign Investment Negative List, which came into effect on July 28. The 2018 Negative List opens up market access for foreign investors by reducing industry-specific restrictive measures from 63 to 48.
Moreover, the plan seeks to implement other market opening measures previously announced at the national level but not yet applied locally, such as allowing WFOEs in NEV manufacturing. The central government announced in April that foreign investment limits on NEVs would be scrapped by the end of this year, but not every region has put the new policy in motion.
Guangdong’s plan further opens up its finance market by canceling the foreign equity limits of Chinese banks and financial asset management companies, and allowing foreign banks to set up joint ventures with 51 percent ownership.
Financial Incentives for Foreign Investors
In addition to market opening measures, the plan includes financial incentives to attract investment. These include cash rewards of up to RMB 100 million (US$14.59 million) for certain investment projects and the same amount for FIEs that establish regional headquarters in the province. Dongguan, one of Guangdong’s major manufacturing hubs, announced similar incentives for establishing headquarters in June.
Further, major investment projects worth at least RMB 2 billion may be granted free use of land, while foreign-invested R&D institutions can apply for subsidies of up to RMB 10 million.
Qualified development zones and industrial parks are also able to offer incentives, such as reduced corporate income tax rates, based on the size and nature of investment projects.
Improving Business Environment
Beyond financial incentives, the plan includes several measures to improve the province’s business environment by streamlining administrative procedures and offering incentives for top foreign talent.
These include the full implementation of the “One Window, One Form” policy to streamline business registration, as well as the setting up of a fast track option for qualified foreign investors. Foreign investors should now be able to register their businesses within five business days.
Other Incentives for Foreign Talents
In terms of talent incentives, senior managers of foreign-invested enterprises and other qualified talent can acquire a work permit and residence permit valid for five years. They will also be entitled to local housing, education, medical care, and pension benefits and be able to employ foreign domestic workers, among other incentives.
To allay foreign investors’ concerns over intellectual property, the province will accelerate the development of the China (Guangdong) Intellectual Property Center, which it also pledged to do last year.
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