Foreign Investment in Guangdong: New Incentives Announced

By Dezan Shira & Associates

Posted: 25th January 2018 08:48

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:
2. Increase the use of financial incentives for foreign investment for the 2017-2022 period, including:
 
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 Listand 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, Shenzhenhas emerged as a hub for innovation and high-tech startups, and also boasts a robust financial sector.

Guangzhouhas also had success in moving up the value chain, by producing higher-end goods like automobiles and high-tech products, while surrounding cities like Foshanhave 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.

Stephen O’Regan, Senior International Business Advisory Associate at Dezan Shira & Associates in Guangzhousaid, “These new regulations certainly show a more open approach by the Guangdong government towards foreign investment, particularly in trying to attract high level talent. However, many smaller companies still find it difficult to incorporate in China; the country is lowering entry barriers only for already strong enterprises.”

According to O’Regan, “The new policies show a step in the right direction, but overseas SMEs may still find it difficult to enter the south China market without more government support”. In this environment, local expertise proves valuable.

O’Regan noted that SMEs can still benefit from some of the new measures both directly and indirectly, as well as other regional incentives. He explained, “Many of Guangdong’s cities offer incentives and subsidies that foreign SMEs find attractive. The Guangdong government is ultimately paving the way for more foreign SME investment by making it easier to access incentives.”
 
This article was first published on China Briefing.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and ASEAN, we are your reliable partner for business expansion in this region and beyond.

For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

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