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Shenyang, Liaoning - The Economic and Cultural Center of Northeast China
Shenyang is the capital city of Liaoning Province and the industrial center of Northeast China. As a city with a population of over 7 million people, Shenyang is an economic, cultural, scientific, technology, trade, finance and transportation leader for all of China. Its geographic location, proximity to resources, and developed transportation networks have driven its economic growth. In 2006, Shenyang’s GDP reached 32 billion USD. It has been featured by the World Bank as one of the most competitive cities in the world. Shenyang is working hard toward becoming the premier heavy equipment and machinery capital of not just China, but of the world.
In order to attract more investors, the municipal government of Shenyang established a series of preferential policies which greatly upgraded the investment environment. The summary points of these policies are listed as follows:
· Allow Equity Joint-ventures and Cooperative Joint-ventures with 1% or more foreign investment;
· Permit foreign investors to inject registered capital over a three year period, if more than 20% of the total amount is submitted initially;
· Allow investors who contribute intangible assets, such as famous brand names, patents or technologies, to use the asset’s full fair value as registered capital and not be restricted to the 20% of registered capital clause;
· Incentivises returning overseas students by allowing them to set up domestic or foreign companies by simply providing Chinese or foreign passports and taking the organizational position of legal representative.
Shenyang is also attracting investors through its four major economic zones including the Shenyang (Hunnan) National New and High-Tech Industrial Development Zone, Shenyang (Tiexi) Economic and Technological Development Area, Shenyang Mt. Qipanshan International Scenery Tourism Development Zone and Shenyang High-Tech Agricultural Development Zone. They range from zones which are relatively new with significant area for expansion, to zones which are mature, with well-developed investment opportunities.
Shenyang Economic and Technological Development Area
The Shenyang Economic & Technological Development Area (SEDA) was established in 1998, is located in the southwest area of Shenyang and is adjacent to the Tiexi District. It is over 120 square kilometers and has five industry clusters including equipment/machinery, auto, pharma/chemical, food/beverage and textiles. SEDA has investment projects ranging from large multinational corporations such as Coca-Cola, Michelin and BMW, to small local Chinese enterprises. In order to attract investors, the Development Area has established a series of preferential policies, which include:
· SEDA is a “Fee Free Area.” There are no applicable fees for registration with the Industry and Commerce Bureau or for land use rights.
· The development administration may agree to subsidize the transportation cost of delivering goods from the zone to a nearby port.
· There is an Enterprise Development Fund which may provide 1% to 5% of a project’s total investment as a financial subsidy for key projects and high-tech innovation.
· Foreign investors who reinvest their profits or dividends from their operations can be refunded 40% of the tax they have paid, based on their reinvestment amount;
· For enterprises which increase R&D expenses by more than 10%, year on year, the actual sum that they have spent will be deducted from their taxable income;
· Foreign invested enterprises which purchase new domestic capital equipment will be refunded the VAT;
· A 10% refund of land use costs will be returned to investors if payment is made within three days of entering into a land use agreement.
· A 10% refund of land use cost will be given for projects which include a registered capital investment of over 5 million USD.
Shenyang - Hunnan High-Tech Industrial Development Zone
The Shenyang - Hunnan High-Tech Industrial Development Zone is located to the south of the city and was founded in 1988. It includes over 80 square kilometers of land and 40 square kilometers of water, on the Hun River. The zone features industrial parks, commercial office districts, residential communities, shopping districts, a golf course, waterfront parks and the new Shenyang Olympic Sports Stadium, which will be used for the 2008 games. There are currently 515 foreign invested enterprises in the zone, with a range from small wholly owned foreign enterprises, to multinationals including, Tyco, GE and AXM Pharma, to JVs entered into by companies such as Otis Elevators and LG. The preferential policies in the zone include the following:
· No applicable fees for forty-five governmental service related to the establishment and operation of enterprises within the district.
· High-tech enterprises can enjoy a favorable income tax rate of 15%;
· High-tech enterprises registered before the end of 2007 will be exempt from income tax for the first two years of operation;
· Instruments and equipment of high-tech enterprises, that can not be produced within China, can be granted exemption from import customs duties;
· High-tech enterprises registered whose revenue from technology development, technology transfer, technology consulting and technology service, can receive a before tax profit deduction of up to three hundred thousand RMB;
Mt. Qipanshan International Scenery Tourism Development Zone
The Mt-Qipanshan International Scenery Tourism DZ is less than a one hour drive from the center of Shenyang. It features Xiuhu Lake, which provides swimming, fishing, and boating during the summer, and ice skating during the winter. The zone also includes Huishan, Davangshan, and Shirenshan Mountains, which are great spots for hikers, campers and skiers. The DZ has established a series of preferential policies for investment in entertainment projects, tourism projects and large cultural and entertainment facilities. The preferential policies include the following:
· Land in this zone may be granted use rights for up to 50 years, during which the land may be transferred, rented, pledged, inherited or donated;
· For large entertainment projects with investment of 10 million USD, the cost of land use rights can be reduced by 20%;
· For projects with investment of 20 million USD, the cost of land use rights can be reduced by 50%. Additionally, payment for the land use fees and business tax will be exempted for three years;
· For large entertainment projects with a 100 million USD investment or more, as an initial investment, the Development Zone can provide land for cooperation and will exempt these large projects from land use fees.
Shenyang High-Tech Agricultural Development Zone
The Shenyang New & High-Tech Agricultural Development Zone is located 12 kilometers from the center of the city. It consists of 2,347 cultivated hectares of land, 1,300 hectares of forest land, and 213 hectares of water. The Pu River flows through the zone, connecting it with the Qipanshan Reservoir. The objective of the zone is the development of a center for high-tech agricultural companies from China and abroad, with a focus of becoming the agricultural Silicon Valley of China in the end.
The Shenyang High-Tech Agricultural Development Zone and the Shenyang municipal government have established a series of preferential policies for land and taxation as follows:
· Investors may obtain land leases for up to 50 years and land use rights are allowed to be transferred within this period.
· The development zone will give investors discounts on land purchase or lease agreements, based upon the amount of land and details of the project;
· Local VAT paid for the first two years will be refunded and 50% for the third year will also be refunded;
· Enterprises in the planting, forestry and horticulture industries will be exempt from agro-forestry production tax for three years and the rate for the following three years will be reduced by 50%.
Dalian, Liaoning – The Silicon Valley of Northeast China
Dalian is the most important port city in Northeast China, is an IT software and hardware hub, maintains a certain portion of its industrial base and is one of the top tourist destinations for all of China. It serves as the Sea & Air gateway to the rest of China and the world. According to the National Bureau of Statistics, in 2005, the GDP for the city was over 29 billion USD, a 14% increase from the previous year. The total value of imports and exports reached 23 billion US dollars, 11 billion from imports and 12 billion from exports.
Dalian boasts a well balanced range of small to medium sized enterprises, along with many large multinationals such as GE, Goodyear, Pfizer, Dell, Accenture, Intel, Canon and Nokia. Because of the cities great importance to Northeast China, it enjoys the ability to make provincial level economic decisions for, but on a local level. Preferential policies that can be found in the area include:
· Equipment imported by overseas-funded projects for their own use is exempt from customs duties and import linkage value added taxes;
· High-tech enterprises can enjoy a favorable income tax rate of 15%;
· Manufacturing enterprises registered before the end 2007 can enjoy a two year tax exemption and a three year 50% reduction. These enterprises may also be exempt from the local income tax of 3%;
· Foreign investors who reinvest their profits for a period of or over 5 years can be refunded up to 40% of the taxes they have paid, based on the reinvestment amount.
· For reinvestment that is injected into enterprise with advanced technology or an export-oriented enterprise, up to 100% of the income taxes previously paid, can be refunded, based on the
Changchun, Jilin - The Largest Auto Production Base in China
Changchun is the capital city of Jilin Province and is a critical piece in the Northeast industrial base. It had GDP of nearly 25 billion USD in 2006. There is a very well-developed industrial cluster in Changchun, focusing on transportation equipment manufacturing. FAW Group Corporation is headquartered in the city and is the largest automotive industrial conglomerate in China. FAW alone accounts for one-fifth of the national auto production annually. Besides the well-developed automotive industrial cluster, two national development zones are located in Changchun and have become investment attractions to companies throughout the world. The development zones are the Changchun Economic & Technological Development Zone and Changchun National High-Technology Industry Development Area.
In order to promote the “Revitalize the Northeast” strategy, the municipal government of Changchun has established a series of preferential policies, which are listed below:
· Companies registered prior to the end of 2007 can enjoy a two year exemption from taxes and three year tax discount of 50%.
· After tax exemption terms expire, export-oriented enterprises which export 70% or more of their annual production will enjoy a 12% tax rate; High-tech enterprises which already enjoy the 15% tax rate, and export 70% or more of their production will enjoy a rate of 10%;
· After the tax exemption terms expire, foreign invested high-tech enterprises, can enjoy a 12% tax rate for an additional three years and for those which were granted a 15% rate, a tax rate of 10% will apply for an additional three years;
· After the tax exemption terms expire, FIE invested in National Encouraged Industries, can enjoy the 15% tax rate for another three years;
· Foreign investors who reinvest their profits or dividends from their operations can be refunded 40% of the tax they have paid, based on their reinvestment amount;
· Foreign investors who reinvest their profits or dividends from their operations into export-oriented or high-tech enterprises can be refunded 100% of the taxes they have paid, based on their reinvestment amount.
Harbin, Heilongjiang – The Oriental Moscow
Harbin, the capital city of Heilongjiang Province, is famous the world over for its annual ice & snow festival and boarders with Russia. The city fits the general Northeast profile of being focused on heavy industries and had GDP of nearly 27 billion USD for 2006. The city is very focused on the restructuring of medium-to-large-sized state-owned enterprises, the utilization of natural resources, urban infrastructure construction and high-tech industry development. In order to promote the Northeast revitalization strategy and attract more foreign investors, the municipal government established a series of preferential policies as follows:
· Companies registered prior to the end of 2007 can enjoy a two year exemption from taxes and three year tax discount of 50%.
· After the exemption term noted above has expired, high-tech enterprises can enjoy an additional three year tax discount of 50%;
· High-tech and manufacturing enterprises with foreign investment can enjoy a 15% tax rate for income tax after the exemption term noted above has expired and will be exempt from the 3% local tax for ten years;
· Enterprises which are listed as “encouraged industries”, by the central government, will enjoy a favorable 15% income tax rate for three years following the expiration of their original tax;
· Export-oriented foreign invested enterprises will be exempt from export VAT and customs duties; Enterprises that export 70% or more of their annual production can enjoy a favorable deduction of their tax rate by 50%;
· Investment in domestic capital equipment can be deducted from enterprise income tax; 40% of this investment can be deducted from the balance of income tax between the purchasing year and the previous year;
· Foreign investors who reinvest their profits or dividends form their enterprises in China for a period of five years or more can receive a refund of 40% of the tax they have paid, based on the reinvested amount; For reinvestment that is injected into an export-oriented or high-tech enterprise, all income tax that was previously paid can be refunded, based on the reinvestment amount;
· For foreign invested enterprises in the agriculture, forestry and animal husbandry industries, or enterprises located in underdeveloped remote areas, income tax can be reduce from 15% to 30% for ten years;
For more information on development zones in the Northeast or throughout China, contact Lulu.Zhang@ChinaFIG.com
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