Hongda have been asked thousands of times over the years where foreign companies like yours can get ‘the best deal’ when incorporating in China. The answer may well be found in QianHai company setup, as the QianHai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in Shenzhen offers terrific opportunities for many of today’s would-be Chinese companies.
Although here at Hongda we can assist your business in setting up a company in QianHai and obtaining the many benefits that come with it, this zone is not for everyone. In fact, certain industries may be better placed elsewhere.
In order to know if the QianHai special economic zone will benefit your company, we’re going to explore:
- What ‘QianHai’ is and its features
- Its benefits
- Its possible drawbacks
By doing so we aim to give foreign businesses like yours the information you need to decide whether a company in this special zone of Shenzhen is the way forward!
Let’s get started…
What Is QianHai and why is it special?
Image credit: "QianHaiDepotResidence" by Jpoon - Own work. Licensed under CC BY-SA 4.0 via Wikimedia Commons
QianHai is a 15 KM/Sq district at the Western edge of the booming Southern Chinese metropolis of Shenzhen.
Shenzhen, although well-known globally thanks to its stock exchange, the 2011 Summer Universiade, and the monstrous 660M tall Ping An finance centre, as well as its close proximity to Hong Kong just across the border, is a relatively new city. As the brainchild of Deng Xiaoping in the 80s, the city was formed as a part of the ‘opening up’ of China, and has mushroomed into a vast city of around 11 Million inhabitants.
It’s very attractive to foreign companies due to its close links to Hong Kong, Macau, and regional capital Guangzhou, and the Guangdong manufacturing hub which is among the largest in the world.
While Shenzhen has its own attractions, QianHai is an even newer idea, and is China’s experiment in strengthening ties with Hong Kong even more, and offering foreign (and domestic) businesses an excellent basis on which to invest in, bring talent to and do business in China.
Learn more about QianHai from the official government website here.
QianHai: Stronger Ties To Hong Kong, But In Mainland China
Image credit: SCMP.com
Anyone who has knowledge of both China and Hong Kong will tell you that they are very different places to do business.
Hong Kong offers easy and straightforward ‘Western’ style procedures and a low corporate tax rate, whereas China offers excellent access to low cost manufacture, but a more complex procedural system and higher income tax rates for businesses.
Due to the ease of setting up a Hong Kong company, and that it offers many benefits to foreign companies wishing to do business in China and Asia as a whole, Hongda always suggest opening one as well as a China company.
However, with the advent of the QianHai Shenzhen-Hong Kong Modern
Service Industry Cooperation Zone, it is now possible for foreign companies choosing QianHai company setup to get many of the benefits of Hong Kong, but be based in mainland China!
It’s a way for foreign businesses to have their cake in China and eat it.
The QianHai special economic zone is being developed to help companies in the following fields specifically to flourish in China:
- Science and technology
- Other services
With a planned investment of almost US$22 Billion in 2015 alone, the Chinese government is taking QianHai very seriously, and plans to turn it into a world-class CBD which massively boosts the service industry in Shenzhen and China, and attracts many foreign experts to the country.
By fostering services, and offering opportunities for companies involved in green energy projects, cultural services, etc, the chance to win investment, as well as being a place to attract more foreign experts by offering tax breaks, QianHai is almost unique in China. It’s especially unusual due to its fairly close mirroring of Hong Kong and its systems in many ways.
QianHai, like Hong Kong, offers:
- Strong financial incentives and infrastructure
- Low income tax burden for individuals and businesses
- Access to international and Hong Kong banking for business
- Relatively easy environment in which to obtain talent needed for service businesses
However, QianHai is perhaps preferable to Hong Kong due to:
- Lower labour costs
- Lower rental costs
- Closer proximity to mainland China manufacturing
- Lower corporate tax for businesses
- Many financial incentives for businesses and individuals
Another interesting element to mention about QianHai is that the barriers for Hong Kong businesses to open offices there have been lowered, as well as telecoms companies, banks, education and health service providers.
The hope is that by attracting international standard facilities there will be even more incentive for highly-skilled Hong Kong and foreign experts to flock to the zone for work, which in turn benefits the local economy.
Although Shenzhen is far from a ‘backward’ city, many foreigners arriving in China are struck by its lack of ‘Western’ standard brands and facilities. While most ex-pats get used to China, by offering a more similar experience to home for them and their families, it is hoped that QianHai can become a world class CBD.
Benefits of QianHai company setup
If your company is a service, technology, science, finance, IT, or logistics business, then QianHai may well be ideal!
The zone has been ear-marked to become a major hub of these business types by 2020, and therefore must attract them quickly in order to justify the Chinese government’s mammoth 65 Billion dollar investment.
In order to attract businesses like yours, QianHai offers:
- A corporate income tax rate of just 15% (lower than Hong Kong’s 16.5%)
- The Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub (a large startup incubator)
- Free housing and office space for 1 year for entrepreneurs (dependent on age and industry) who open companies there
- A fund to offer low-cost loans to startups
- Easy access to VC firms due to them being given preferential policies
- Individual tax for foreign experts lowered to 15% in comparison to China’s usual 25% rate
- High tech and animation industries are exempt from business tax for 2 years from when they become profitable, and then it is charged at 50% for the following 3 years
- Development of certain green technologies, such as water-saving, is tax deductible
- Loans in foreign currency, such as HK$
It is then clear that for foreign service industry businesses QianHai could be a very good option for their China companies due to its financial benefits.
Drawbacks of QianHai
Honestly, there aren’t many drawbacks of setting up in QianHai for service companies.
The big issues that could prove difficult for foreign businesses wishing to set up here are:
- QianHai company setup is not really so suitable for non-service related industries. The benefits of the zone are generally geared towards encouraging these types of business, and so other businesses there will not be able to get the tax breaks, etc.
- Setting up a company in QianHai means that you must be based in Shenzhen, Guangdong. If this location in Southern China is not suitable, then QianHai won’t be an option.
- QianHai is a very new development and it has rules, laws, and processes which are unique in China. It is hard to follow these for foreign businesses.
- In order to take advantage of investment opportunities, and to be sure that your new QianHai company is making the best of the benefits open to it, you will need local advice from Chinese individuals who know exactly what these are, and which benefit you specifically. Given that all information is in Chinese, skill in the language is also a must.
The QianHai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in Shenzhen offers an exciting platform in which foreign service providers, financial companies, and IT and technology businesses can flourish.
The Chinese government are investing a huge amount of money into the zone in the form of building, infrastructure, Western standard communications, logistics, living, health and education facilities; but also grants and tax breaks to companies in the desired industries.
The financial benefits on offer, in the form of tax breaks and investment opportunities, are compelling reasons to consider QianHai as your gateway into Mainland China. So if Guangdong in Southern China is a suitable home for your business then you simply can’t ignore QianHai as an option.
Are YOU interested in choosing QianHai as a base for your service company?
Why? Which elements of this zone are most attractive?