- The Qianhai Shenzhen-Hong Kong Cooperation Zone is a pioneering business zone to promote the high-quality development of modern service industries, including finance, logistics, information technology, and science and technology, as well as to strengthen collaborative ties between Guangdong, Hong Kong and Macao in the Greater Bay Area.
- It will allow Hong Kong to give full play to its long-established unique advantages as a world-class hub for high-end professional services.
The Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (“Cooperation Zone”) is located in the southwestern area of Shenzhen – Qianhai – dubbed the “Manhattan of the Pearl River Delta”. It is a pioneering business zone to promote the high-quality development of modern service industries, including finance, logistics, information technology, and science and technology, as well as to strengthen collaborative ties between Guangdong, Hong Kong and Macao in the Greater Bay Area (“GBA”). Initially sprawling over 15 km2, the Cooperation Zone is set to expand eight-fold to 121 km2, making up nearly 6% of Shenzhen’s total area.
The further economic integration of Hong Kong and Macao’s economies into the GBA, as delineated in the Plan for Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (“Qianhai Plan”) issued in September 2021, will allow Hong Kong to give full play to its long-established unique advantages as a world-class hub for high-end professional services. As of 2021, around 11,500 Hong-Kong invested enterprises were registered in Qianhai – most of which were from modern service industries – and the number of Hong Kong-invested companies increased by 156% year on year. In addition to delving into the various developments in key policy areas thus far, the article will address how Hong Kong can leverage the plentiful opportunities arising from the enhanced cooperation with its closest neighbours.
Background
The inception of the Cooperation Zone began more than a decade ago in 2010, with the promulgation of the Framework Agreement on Hong Kong/Guangdong Cooperation setting out the direction of collaboration and complementary development. For the first time, Qianhai was termed a key cooperation zone linking Hong Kong and Guangdong. The cornerstone policy document underpinning the formation of the Cooperation Zone, also issued in 2010, is the General Development Planning for Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (“Development Planning”), which designates Qianhai as a “demonstration zone for Hong Kong/Guangdong modern service industry innovation and cooperation”. The overarching aims are to position Qianhai as an important hub for China’s modern service industries; to foster closer cooperation and integration with Hong Kong; and for Qianhai to serve as an experimental zone for the opening-up of the financial industry and capital markets.
Furthermore, the development of Qianhai has been ascribed a high level of importance, labelled as one of the seven most significant Guangdong-Hong Kong-Macao collaborative projects in the Outline of the 12th Five-Year Plan in 2011. Although the Development Planning had originally been set to lapse in 2020, in light of President Xi Jinping’s comments on the necessity to advance reforms and opening-up measures on the 40th anniversary marking the creation of the Shenzhen Special Economic Zone, the Qianhai Plan was promulgated in September 2021. It provides a blueprint for the continuing development of the Cooperation Zone until 2035.
Extensive expansion
The substantial geographical enlargement of the Cooperation Zone covers the Shekou and Nanshan areas (23 km2), Bao’an Central District and Dachan Bay area (23 km2), the airport and its vicinity (31 km2), and the Convention and Exhibition New Town, and Shenzhen New Marine City (29 km2). The latest iteration of the Cooperation Zone includes the Shekou Area that is part of the Guangdong Free Trade Zone. Qianhai’s distinct role as a “special zone within a special zone” means that its primary function is that of an “innovator”, conducting avantgarde experiments – in addition to what is being test run in Shenzhen, which is a trailblazer in economic reform in its own right.
Trade and investment facilitation
To ensure that cross-border trade and investment takes place as seamlessly as possible, customs clearance and business registration procedures have been significantly streamlined. The digitalisation of tax returns and payments have also added to the ease of doing business in Qianhai. For example, the Shenzhen/Hong Kong land-air intermodal arrangement has been in place since 2017, which simplifies inspection procedures for goods in the Qianhai Comprehensive Bonded Zone (“Bonded Zone”) destined for export via Hong Kong International Airport. Under the arrangement, processes such as booking, palletisation, and security screening of goods can all be done by companies within the Bonded Zone so as to facilitate a smoother transfer upon arrival in Hong Kong. Additionally, with the launch of the automatic approval service in 2019, business registration can now be completed under a minute, and the Integrated Registration Service platform offers a one-stop service in respect of business registration, bank account opening, and invoicing matters.
- Preferential policies and financial incentives
To encourage Hong Kong-invested companies to set up their headquarters in Qianhai, a slew of preferential policies and financial incentives have been ushered in, including, notably, a reduced corporate income tax (“CIT”) rate of 15% – as opposed to the standard national rate of 25% in Mainland China – for qualified enterprises until 31 December 2025. Eligible foreign-invested enterprises can also benefit from this concessionary rate. They should ascertain whether their business falls within the remit of Qianhai’s Catalogue for Encouraged Industries Eligible for CIT Preferential Treatment, which spans 30 sectors and covers five general industry sectors: commercial services, cultural and creative industries, information services, modern logistics, and technology services.
Other one-off setting-up and moving-in incentives on offer are worth up to RMB10 million each. For qualified financial institutions that registered in Qianhai after 1 January 2021, a subsidy of up to RMB30 million will be available for the purchase of office premises and up to RMB5 million annually for office rental.
Trade in services liberalisation
As set out in the Qianhai Plan, the alignment of industry standards and rules with Hong Kong and Macao is integral to further promoting a fluid cross-border exchange in services under the auspices of the Mainland and Hong Kong Closer Economic Partnership Arrangement (“CEPA”). Signed in 2003, the CEPA is the first ever free trade agreement signed between Hong Kong and Mainland China, which covers four main areas: trade in goods; trade in services; investment; and economic and technical cooperation. Under the agreement, Hong Kong service providers can enjoy preferential treatment when setting up shop on the Mainland in a wide range of service sectors, many in which Hong Kong traditionally excels and has competitive advantages. The Qianhai Plan envisages a comprehensive convergence of standards, including in service standards, inspection and testing, certification and accreditation, and vocational qualifications. Presently, Hong Kong and Qianhai authorities have been working closely to develop schemes for cross-border recognition of professional qualifications, which will greatly enhance the ease for Hong Kong-based accounting, finance, legal as well as architectural and related engineering professionals to practise in the Cooperation Zone.
Innovation and technology
The Qianhai Plan focuses on the development of artificial intelligence, financial technology, health and new materials – riding on Hong Kong’s expertise in these areas of innovation. On a related front, the Shekou area that has recently been incorporated into the Cooperation Zone is already home to mature, well-established industrial clusters and has, in the past few years, seen an upgrade in value chains through leveraging its strength in manufacturing. It has also nurtured fledgling industries, such as electronic commerce and the Internet of Things, to growth. Around 450 technology enterprises, including Apple, IBM as well as unicorns, are registered in the Shekou Net Valley Park.
The Cooperation Zone lends itself to being an ideal platform to harness the complementary synergies between Hong Kong and Shenzhen, thereby allowing for the development of a more internationally competitive and complete industry chain. In the realm of innovation and technology (“I&T”), Hong Kong prides itself on its world-class scientific research in the upstream industry chain, while Shenzhen’s strengths lie in the midstream and downstream industry chain with efforts primarily focused on conducting applied research, market-related research and development (“R&D”), and industrialising the fruits of research endeavours.
Running in parallel to the Qianhai Plan is the Northern Metropolis Development Strategy, which seeks to transform the Hong Kong-Shenzhen boundary area into “Twin Cities, Three Circles”. One of the “Three Circles” covers the Shenzhen-Hong Kong Innovation and Technology Cooperation Zone at the Lok Ma Chau Loop, which is to be developed into a preeminent global I&T hub in the Greater Bay Area. There is considerable scope for the two Cooperation Zones to join hands as well as to spur on each other’s development.
To nurture the next generation of tech-savvy entrepreneurs, the Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub opened in 2014, which has since expanded in scope and size. As of September 2022, more than 600 start-ups, including 331 from Hong Kong, were incubated at the hub.
-
18 measures to support the linked development of Shenzhen and Hong Kong venture capital (“VC”) investments
In September 2022, a joint package comprising 18 measures was promulgated by Hong Kong’s Financial Services and the Treasury Bureau and Shenzhen Qianhai Authority that aims to support the development of a mechanism linking Shenzhen and Hong Kong VC investments, promote Shenzhen-Hong Kong collaborative efforts on I&T, and leverage finance to nurture the growth of an international I&T hub in the GBA.
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, observes: “Going forward, we will explore with Qianhai more opportunities for financial development and promote Shenzhen-Hong Kong co-operation at a higher level under which the two cities can serve as dual engines in the GBA.”
A Qianhai Shenzhen-Hong Kong international VC cluster will be established in the Qianhai International Financial City, which is situated in Shenzhen’s Qianhai Guiwan and Qianwan district within the Cooperation Zone. In addition, to facilitate two-way financial and technological development and talent exchanges, a series of preferential policies, including rewards and subsidies, has been introduced. For example, a reward based on 2% of the actual amount of investment – up to RMB500,000 per investment – will be available to Qianhai Qualified Domestic Investment Enterprises investing in eligible Hong Kong I&T entities or projects. Each enterprise can receive up to RMB2 million in total per year. Hong Kong VC institutions and other eligible offshore entities will also be able to set up Free Trade Accounts in Qianhai to enable the free flow of offshore capital.
Opening-up of financial services
The Cooperation Zone’s role in financial services will be twofold: to serve as a “pilot zone for cross-border Renminbi business innovation” and a “testing ground to showcase the opening-up of the nation’s financial industry”. So far, a series of pilot schemes have been introduced to trial and test liberalisation in areas that interface with Hong Kong’s financial markets, including cross-border Renminbi lending, two-way cross-border cash pooling, two-way cross-border bond issuance, and the amalgamation of foreign and domestic bank accounts. In the future, cross-border securities investment, spot commodity trading on the Qianhai Mercantile Exchange of the Hong Kong Stock Exchange, green finance and the establishment of unified green finance standards will be explored.
Innovative judicial system
A key milestone in the cross-border convergence of legal systems and rules is by granting wholly owned Hong Kong enterprises with no “foreign-related elements” registered in Qianhai the choice of applying common law in civil and commercial contracts and having arbitration seated in Hong Kong. In 2021, the GBA Legal Professional Examination was rolled out on a pilot basis, allowing Hong Kong-based legal practitioners with five years or more of relevant experience to acquire a civil law practising certificate. Upon qualification, they will be able to provide a range of legal services in civil and commercial affairs, including litigation and non-litigation matters, throughout the GBA in which civil law is applicable. Since 2016, the Qianhai Cooperation Zone People’s Court has appointed Hong Kong-based jurors and mediators to handle cross-border related disputes, as well as adopting various judicial reforms.
In January 2022, the Shenzhen-Hong Kong international legal services centre was established in Qianhai and has so far attracted the participation of more than 120 international institutions in different fields, including arbitration, mediation, legal services and intellectual property protection. In addition, the Shenzhen Intellectual Property Tribunal was set up in Qianhai in 2018. As of 2020, it heard more than 10,000 cases.
To encourage Hong Kong-based law firms to expand their presence across the border, the Department of Justice of Guangdong Province lifted the restriction of the minimum capital injection ratio of 30% by Hong Kong firms in partnership associations with their Mainland counterparts. Furthermore, the Qianhai Plan supports and encourages law firms from Hong Kong as well as overseas to establish representative offices in the Cooperation Zone. The eBRAM International Online Dispute Resolution Centre, South China International Arbitration Centre (HK) and Des Voeux Chambers will be the first to join the GBA International Arbitration Centre exchange and cooperation platform.
Looking ahead: Development direction until 2035
The materialisation of the Qianhai Plan will likely consolidate the achievements in the last decade with innovative development of modern service industries continuing to take centre stage. The institutional mechanisms for service industries will be bolstered via a multi-prong approach, for example, by strengthening the interconnectivity between hubs and facilitating land, sea and air intermodal transport arrangements through the construction of integrated ports, as well as promoting innovative shifts in supply chains. In addition, innovation in financial institutions, markets and products will be actively encouraged. In respect of I&T, the Qianhai Plan envisages the further development of R&D and the implementation of management systems institutions for cross-border cooperation. It also seeks to improve the availability of science and technology funds and reel in investments from VC and R&D institutions.
As another collaborative platform to boost regional integration within the GBA, the Cooperation Zone plays, in particular, to Hong Kong’s long-held strengths in service industries. It is expected to draw extensively on Hong Kong’s experience as a professional services and commercial hub, which will in turn vastly enrich the city’s tale of development.
