Investment in Shenzhen - Business Eco-system in Major China Cities

High-tech industries are the heart of Shenzhen’s economy. Numerous world-leading enterprises in high-tech industry choose to set their home in Shenzhen. Shenzhen can be an ideal choice for companies engaging in the following categories of industries:

When considering doing business in China, the first question that always comes to your mind is: in which city should I start my business? Choosing the right city to pursue your success in China is not a simple question. There are numerous factors to consider. The business attractiveness landscape is the comprehensive result of the business resource aggregation, urban hubness, resident activity, and future plasticity and development potential.

Business Attractiveness and Eco-system in China – Chinese Cities Series!

To help you choose your ideal location to start your business, Hongda has planned a series of blogs on the business attractiveness and eco-system in major cities and regions across China, including Beijing, Shanghai, Guangzhou, Shenzhen, Hainan, and Hong Kong S.A.R.!

Still not sure how to choose the optimal destination for your investment? Simply book a free meeting with Hongda’s consultation and we will discuss your business plan and advise you on the most suitable city for you to run your company. If you want to know the investment landscape of any other cities in China, you are also welcome to contact us and let us know your requirements!

Shenzhen – from small fishing town to international metropolis

Introduction to Shenzhen

Shenzhen is one of the most prosperous cities in China standing on the east bank of the Pearl River estuary, boarding Hong Kong to the South. With a population of 17.66 million by the end of 2022, Shenzhen is the third most populous city by urban population after Shanghai and Beijing. Before being known as the international metropolis of China, Shenzhen used to be a small fishing town, who experienced a tremendous economic growth during the past 45 years.

As a global center in technology, research, manufacturing, business and economics, finance, tourism, and transportation, Shenzhen is outstandingly famous for its leading innovation in information technology and computer science. Sometimes also known as ‘China’s Silicon Valley’, Shenzhen is home to numerous software companies and high-tech related manufacturers. Locating at the center of the Greater Bay Area, Shenzhen is the gateway of the Chinese mainland to Hong Kong, Macao, and the rest of the world, making it an ideal choice for international trades. With the solid business infrastructure and open environment, it acts as China’s window to the globe and brings international investors countless opportunities.

With its development strategy focusing on high-tech industry, finance industry, logistics industry, and cultural and creative industry, Shenzhen has become one of the most popular investment destinations in China. Let’s see where your opportunities lie!

Shenzhen: A Key Destination for FDI in China

During the past years, Shenzhen has always been the most important investment destination in China. According to the report of the Commerce Bureau of Shenzhen Municipality, the investment from developed economics have rocketed, especially from Canada, the U.S., Singapore, and Switzerland, showing a maximum growth rate of 655%. MNCs have continuously established overseas headquarters, branch companies, and R&D centers in Shenzhen, contributing to 6500 newly established foreign-funded enterprises from Jan. to Oct. 2023. Now let’s take a look at the encouraged industries.

High-tech industries

High-tech industries are the heart of Shenzhen’s economy. Numerous world-leading enterprises in high-tech industry choose to set their home in Shenzhen. Shenzhen can be an ideal choice for companies engaging in the following categories of industries:

• Information technology and electronics industry: Shenzhen is one of the largest electronics industry bases in China and is known as "China's Silicon Valley". The city is home to many electronics companies, including well-known companies such as Huawei, ZTE, and Tencent.
• Biopharmaceutical industry: Shenzhen has also had significant development in the number of biomedicine related companies, including biopharmaceuticals, medical devices, and genetic engineering.
• New energy and clean technology: Shenzhen has made a series of progress in new energy and clean technology, including solar energy, wind energy, and electric vehicles.
• Advanced manufacturing: Shenzhen has strong capabilities in the field of advanced manufacturing, covering many fields such as electronics manufacturing, aerospace, and automobile manufacturing.
• Artificial intelligence and innovative technology: Shenzhen is an important gathering place for China's artificial intelligence industry, attracting many innovative enterprises and start-up companies.
  

Finance industries:

Shenzhen has achieved significant development in the financial industry and has become one of the important centers of China's financial industry. It is now one of the most famous raising financial hubs around the world, together with the well-known ones such as Hong Kong and New York.

• Securities market: The Shenzhen Stock Exchange (SZSE) is one of the major stock exchanges in China, and one of the major stock markets is the GEM. GEM has also become the listing venue of choice for many start-up companies and high-tech companies.
• Financial technology (FinTech): Shenzhen has established a solid background for the investment of technology related enterprises, leading to a strong innovation power in the field of financial technology.
• Banking industry: Shenzhen is the headquarters of many large banks in China, including China Merchants Bank, Ping-An Bank, etc.
• Investment funds and private equity: A large number of investment funds and private equity companies have emerged in Shenzhen's financial system. These institutions provide financial support to innovative enterprises and promote entrepreneurship and innovation.

Logistics industries:

Shenzhen is one of the most developed regions in China in terms of logistics industry, benefiting from its strategic location of outstanding ports. Logistics industry plays an important role in supporting Shenzhen’s global trade with the world, which is an important sector that you should consider.

• International cargo ports: Shenzhen's Shekou and Yantian ports are one of the busiest international cargo ports in China and in the world. These two ports provide efficient and convenient channels for import and export trade.
• Logistics park: Shenzhen has a number of modern logistics parks, such as Bao'an, Longgang, Futian, etc. These parks have complete infrastructure and supporting services, providing a good development environment for logistics companies.
• Cross-border e-commerce logistics: As one of the major export cities for cross-border e-commerce in China, Shenzhen has developed many cross-border e-commerce logistics service providers.
• Application of ‘Internet of Things’ technology: Shenzhen actively applies Internet of Things technology in the logistics field, improving the efficiency of logistics operations through sensors, big data analysis and other means.
  
  

Cultural and creative industry:

Shenzhen has achieved significant development in the cultural innovation industry. By supporting creative design, digital media, art industry and other fields, it has gradually formed a rich and colorful cultural industry ecosystem. Shenzhen is working hard to build a cultural innovation center with international influence.

• Design and Creative Industries: Shenzhen is booming in the design and creative industries, with numerous design companies, creative parks, and designer studios, covering product design, graphic design, and clothing design.
• Digital media and game industry: Shenzhen is one of the important bases for China’s digital media and game industry. Many digital media companies and game development teams have headquarters or branches in Shenzhen.
• Art market and galleries: Shenzhen's art market is gradually emerging, with a number of galleries, art institutions and cultural exchange centers emerging. Artists and collectors have found more exhibition and exchange opportunities in Shenzhen, driving the prosperity of the local art market.

Shenzhen’s Key Industry Regions

Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone

Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone is located on the banks of Qianhai Bay in the west of Shenzhen City, Guangdong Province in China. Lying to the west of Shekou Bay and the east of Lingdingyang of the Pearl River, Qianhai was approved and established by the State Council on August 26, 2010. Taking advantage of the geographical advantages adjacent to Hong Kong, the plan specially formulates the "Overall Development Plan for Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone", positioning the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone as a pilot zone for Shenzhen-Hong Kong cooperation, a system and mechanism innovation zone, and a modern service zone, an industry agglomeration area, and structural adjustment leading area. While Shenzhen is often seen as China's special economic zone, performing the role of the frontier of reform and opening up, Qianhai will then be known as the “special zone within the special economic zone”, bringing you outstanding advantages in the following aspects: 

• Modern Logistics Services: the preferential policies implemented in Qianhai will benefit companies engaging in supply chain management, logistics outsourcing services, modern logistics technology, logistics public service system development, third-party logistics settlement management, etc., which effectively support logistics players to provide services in the Chinese mainland and the world.
• Information service industry: in the category, nine sub-projects, including value-added telecommunication business application system development, e-commerce, government technical support, information security technology R&D, new generation mobile communication network, and IPv6 technology R&D, etc. With the support of relevant policies, companies can promote the development of software and information technology service industry as well as the in-depth cooperation between the Chinese mainland and Hong Kong.
• Technology service industry: Qianhai will focus on supporting the development of high-tech industries such as innovative materials, energy, life sciences, medicine, and environmental protection, which mainly include professional technology services for next-generation energy and new materials, gene sequencing and stem cells, etc. Participants in technologically advanced service industries related to life sciences, new energy batteries, three-dimensional display and printing technology, information technology, and business process outsourcing will truly enjoy the tax benefits of Qianhai’s policies.
• Cultural and creative design industries services: companies participating in creative design services including visual communication design, industrial design and high-end arts and crafts design, cultural information resource development and creation services, network audio-visual program technology, animation and online gaming, new media technology, etc. Many policies and tax incentives in Qianhai will accelerate the development of cultural and creative design industries.
• Business service industry: the services of management consulting, urban planning, and other professional skills services, legal services, accounting, taxation and asset evaluation, credit investigation and rating, credit services, international conference, and professional exhibition services, human resources and human capital services, intellectual property services and international cruise operations are included in this category. Qianhai will play a positive role in improving the overall service level and promoting the comprehensive development of the business service industry.

If you want to know more about Qianhai, please visit and read our previous blog on Qianhai. 

China (Guangdong) Pilot Free Trade Zone Qianhai & Shekou Area of Shenzhen

Shenzhen Qianhai Shekou Free Trade Zone was established on April 27, 2015, with a planned area of 28.2 square kilometers. This FTZ gathers cooperation between Shenzhen and Hong Kong with three major national strategies: the ‘Beld and Road’, Shenzhen-Hong Kong cooperation, and free trade pilot zone. Implementing an integrated system of ‘cooperation zone + free trade pilot zone + comprehensive bonded zone’, this FTZ has contributed to the reforming and opening up of Shenzhen and made a huge progress on investment facilitation, financial openness, intellectual property protection, and law system innovation.

Shenzhen-Hong Kong Cooperation Zone for Technology and Innovation at the Lok Ma Chau Loop

The Shenzhen-Hong Kong Cooperation Zone for Technology and Innovation, located at the Lok Ma Chau Loop (LMC Loop), stands out as a distinctive platform within the Greater Bay Area, focusing on technological innovation. Taking advantage of the unique opportunities presented by cross-border and cross-customs-territory operations, coupled with the 'One Country, Two Systems' framework, the Cooperation Zone has emerged as a prominent symbol of Shenzhen-Hong Kong collaboration in institutional and technological advancements. The conceptual illustration above outlines the planned development of the Cooperation Zone.

Located in the southern part of Futian District, Shenzhen, bordering Hong Kong, the Cooperation Zone spans an area of 3.89 square kilometers. It comprises two parks – the 0.87-square-kilometer Hong Kong Park on the southern bank of the Shenzhen River and the 3.02-square-kilometer Shenzhen Park, which includes Huanggang Port and Futian Bonded Area, on the northern bank of the Shenzhen River. This strategic location grants the Cooperation Zone four distinct advantages: geographical positioning, institutional competitiveness, a unique spatial carrier, and combined strengths from both Shenzhen and Hong Kong.

With a total investment exceeding RMB 61.5 billion, construction of the Cooperation Zone's first set of projects, 14 satellite parks, and supporting facilities commenced in November 2019. To date, over 100 research projects have been initiated, primarily located in the Shenzhen Park. Several high-end scientific research projects and platforms have been successfully completed and are now operational, including an innovation and entrepreneurship initiative by the Hong Kong University of Science and Technology and CENI, a major national science and technology infrastructure project.

Advantages and Benefits of Investing in Shenzhen

Corporate Benefits

Shenzhen has been implementing preferential tax policies to attract enterprises and talents and promote economic development. Hongda lists some of the corporate benefits that you may enjoy here. You are also welcome to book a free meeting with Hongda to discuss your actual situation!

• Corporate income tax benefits: Shenzhen is continuously putting more efforts in building science and technology highland in China and attracting innovation enterprises to invest in this city with corporate income tax incentives. High-tech enterprises enjoy a preferential corporate income tax rate of 15%. Newly established small and micro enterprises that meet the requirements can pay corporate income tax at a rate of 20% for the first three years.
• Tax deduction for R&D expenses: Enterprises are encouraged to increase investment in R&D, and the deduction ratio for R&D expenses is increased and can be deducted before corporate income tax. Newly established high-tech enterprises supported by the state are exempt from corporate income tax from the first to the second year starting from the tax year in which they obtain their first production and operation income. From the third to the fifth year, they are subject to the statutory tax rate of 25%.
• Import and export tariff preferences: Some imported equipment, technology, raw materials, etc. can enjoy tariff reductions or discounts, especially between the contrasting parties of the RCEP.
• Reimbursement for R&D: The government supports enterprises or institutions to purchase intellectual property rights or intellectual property licenses from universities and R&D centers in Hong Kong and Macao, and supports the transformation in Shenzhen with support of up to 500,000 yuan per year.
• The government supports the establishment of joint laboratories between Fortune 500 companies and national innovation carriers or important international laboratories. Qualified joint laboratories will be supported with a maximum of 5 million yuan based on 50% of the actual investment in operation.

Individual Benefits

Shenzhen has been actively promoting the introduction of talents and has provided a series of policy supports to attract high-level, high-skilled, and highly innovative talents.

• Talent introduction subsidies: Shenzhen provides a certain amount of introduction subsidies to introduced high-level talents, urgently needed talents, and talents with innovative and entrepreneurial abilities. This includes a one-time introduction incentive and a subsidy for settlement costs. University undergraduates, graduates, and PhD graduates can enjoy subsidies of 15000, 25000, and 30000 RMB respectively.
• Talents working in high-tech industries and encouraged industries can enjoy financial reimbursement of individual income tax (up to 5 million RMB). They will only need to pay individual income tax at a capped tax rate of 15%.

You Will Surely Be Surprised by Shenzhen

Shenzhen is also an open city who welcomes people from all around the world. The slogan "Once you're here, you're a Shenzhener" reflects the inclusivity of Shenzhen as a city that embraces and integrates various international elements. It conveys a sense of belonging for investors, suggesting that once they arrive, they can settle in and establish their roots in this city. 

Another noteworthy aspect is the concept of "Shenzhen speed," which signifies a fast-paced environment. It refers to the rapid development and progress achieved by the city of Shenzhen in various aspects, including the economy, technology, and urban construction. Designated as an economic special zone during the early stages of reform and opening-up, Shenzhen became an experimental area for implementing open policies. The administration procedures in Shenzhen are much faster in Shenzhen than those in any other cities in China. For example, company registration, the very first step to start your business in this nation, can be obtained in as quickly as one working day.

Conclusion

Shenzhen is now well-recognized as one of the most popular investment destinations in China. There is no doubt that by taking the advantages of the incentive policies of the Shenzhen government, as well as its outstanding geographic location at the heart of the GBA, you can make your operation and business in China even more successful.

Shenzhen is also the headquarter of Hongda. By carrying out deep research into this city’s policies and business environment, Hongda is one of the most important players in providing business services for our foreign clients who want to continue their business and success in China, especially in the Shenzhen and the GBA markets. If you want to know more about how to start your business in Shenzhen, please feel free to book a meeting with our consultants to discuss your plan!