Guangzhou plays a unique role as the capital of Guangdong province, which has the largest regional GDP of China’s provinces and is the country’s biggest exporter, accounting for more than one third of China’s total foreign trade. Alberto Vettoretti of Dezan Shira & Associates looks under the bonnet of one of China’s top performing, economic engines.
Surrounded by three out of four of China’s original special economic zones—Shenzhen, Zhuhai, and Shantou—Guangzhou still holds its own economically. Over the past 30 years, Guangzhou has achieved annual GDP growth of around 13 per cent, ranking third in the country in terms of economic scale after only Beijing and Shanghai.
Guangzhou’s Five-Year Plan (FYP) issued in 2011 focuses on developing the city’s innovation capacity, strengthening its trade standing and promoting its role as the heart of the Pearl River Delta.
One of Guangdong’s Two National Centres for Innovation
Guangzhou and Shenzhen are repeatedly mentioned as Guangdong province’s pioneering cities for innovation. Shenzhen is the first pilot city of innovation in China approved by the National Development and Reform Commission (NDRC) in 2008, while Guangzhou was approved in 2009.
In 2011, Shenzhen was elected as the most innovative city in China, according to the China Urban Competitiveness Ranking released by the Hong Kong-based China Institute of City Competitiveness, while Guangzhou was ranked third in innovative competitiveness. The ranking evaluates Chinese cities based on their ability to innovate in terms of economy, governance, science and education, culture and eco-environmental protection. This ranking is representative of Shenzhen’s earlier start in promoting innovation; the Shenzhen government issued the Overall Plan for Shenzhen as a National Innovative City (2008-2015) in 2008, while Guangzhou’s Overall Development Plan for Guangzhou as a National Innovative City (2011-2015) was promulgated in 2011.
Among various goals, Shenzhen’s Innovation Plan aims to establish a group of state, provincial and city-level laboratories, research and development (R&D) centres and enterprise technology centres in the fields of electronic information, biotechnology, new materials, new energy, digital equipment, medical equipment and energy saving and environmental protection industries. In addition, Internet-based, newly-emerging service industries, such as spatial information services, modern logistics, digital content, software outsourcing, e-commerce, and value-added service animated games are also actively promoted, as well as the general merging of high and new technologies with traditional industries.
Under the plan, innovative talents in the areas of R&D, operation management, creative design, and intellectual property rights will be recruited from abroad. Meanwhile, local talents will be sent abroad annually for training. The plan also promises a steady increase in investment into technology by the government and funding support for enterprises and R&D institutions in Shenzhen carrying out key, state-level plans and projects.
Guangzhou’s Innovation Plan echoes Shenzhen’s in many ways. It hopes to cultivate a group of high- and new-technology enterprises and to increase the ratio of the output value of high- and new-technology products in the total industrial output value. It aims to promote information technology, biology and health, new materials, energy saving and environmental protection, new energy automobiles and new energy industries.
It also encourages the development of modern service industries, including researching and developing systems related to e-commerce, online banking, and online trading for use in the finance and insurance industries. In addition, it encourages finance institutions to commence adherence to intellectual property rights and offer loans to businesses and insurance companies to provide for high- and new-technology enterprises.
An International Centre for Commerce and Trade
Provincial and municipal governments speak of Guangzhou’s future as a regional financial and logistics hub, an international business destination, and a regional shopping centre. Specifically, Guangzhou’s FYP includes a vision of “sourcing global commodities to distribute in Guangzhou” and expanding the international influence of the “Guangzhou Price”. Moreover, the city will fully play out its advantage as a trans-regional renminbi (RMB) settlement pilot city to support the internationalisation of the RMB.
In mid-2011, Guangzhou issued a key official document emphasising that the government will open more sectors to foreign direct investment (FDI), offer more fiscal support as well as regulatory convenience, and build up better infrastructure to provide more incentives to attract FDI.
The document states that the city encourages FDI into sectors of urban transport, public services as well as infrastructure construction, and supports foreign investors’ involvement in the restructuring of state-owned enterprises. It specifically calls for more FDI into equity investment enterprises as well as equity investment management enterprises, hoping to promote Guangzhou into one of the pilot cities included in China’s Qualified Foreign Limited Partner Program.
Guangzhou also intends to diversify the avenues for foreign investors to increase registered capital, maintain cash flow and raise additional capital. In the future, foreign investors will be able to utilise distinct types of capital—including capital funds, undistributed profits, domestic company equity, registered foreign debt and reserve funds—to increase their registered capital for the companies. It is also hoped that companies can obtain local currency more easily by completing foreign exchange settlements due to various company needs, rather than payment needs only, and also by being allowed to invest with their legal RMB income overseas. Moreover, the government even plans to recommend qualified, foreign, joint-stock companies to list at home and abroad, providing them with a larger platform for capital raising.
Headquarters of foreign-invested enterprises (FIEs) as well as small and medium-sized FIEs settled in Guangzhou are going to enjoy favourable tax treatment and other public services provided by the government. More incentives will also go to FIEs that are involved in technological innovation, strategic emerging industries and outsourcing services. FIEs will receive incentives for participation in major scientific research projects, benefit from the government’s special fund for the development of strategic emerging industries, and enjoy business tax exemption on their offshore outsourcing services. Companies certified as service providers with advanced technologies will continue paying their corporate income tax at a favorable 15 per cent rate between 1st January, 2009, and 31st December, 2013. Foreign-invested enterprises that are involved in Guangzhou’s encouraged industries can also obtain the land use rights faster and at lower prices.
Human resource mobility is also planned to become easier in Guangzhou than in other cities. If a FIE has a registered capital of over USD 30 million in Guangzhou or engages in key industries, its foreign staff who need to travel overseas frequently for work can apply for a one-year F business visa with multiple entries; its senior managers and technicians can apply for a two to five-year F business visa with multiple entries; and its legal representative, (deputy) general manager and chief financial officer can apply for a two to five-year residence permit. Chinese staff who need to travel to Hong Kong and Macau often for work in such an FIE can also apply for an exit-entry permit for travelling to and from Hong Kong and Macau with multiple-entry endorsement. In addition, the ‘high-level talents’ that FIEs hire will also enjoy favourable policies from the government, including benefits given to their spouse and children.
Heart of the Pearl River Delta
The outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020), put forward by the NDRC, describes the PRD region as an experimental development area and calls for the creation of three super-metropolitan areas comprising Guangzhou and Foshan, Hong Kong and Shenzhen, and Macao and Zhuhai.
The plan also includes the following key goals related to Guangzhou:
- Establish financial centres in Guangzhou and Shenzhen, as shown by projects such as the second board at Shenzhen Securities Exchange and construction of Guangdong Financial and High-tech Services Zone.
- Promote Guangdong as a world class logistics centre by promoting the construction of a number of hub-type modern logistics parks, including those at Baiyun Airport, Bao’an Airport, Guangzhou Port, and Shenzhen Port, and improve infrastructure.
- Develop a series of specialised conventions and exhibitions, including the Guangzhou Export Commodities Fair and Guangzhou Small- and Medium-sized Enterprises (SME) Fair.
- Increase the innovative capacity of the region as a whole. This includes building 100 new R&D centres and developing three to five high-tech industrial clusters.
A number of new infrastructure links are also planned to better connect the greater PRD region and integrate it with the pan-PRD area. Major ongoing infrastructure developments directly related to Guangzhou include:
- Express railway from Guangzhou via Shenzhen to Hong Kong.
- Coastal railway, the Guizhou-Guangzhou railway, the Nanning-Guangzhou railway.
- Guangzhou’s urban rail transit systems.
- Improvement of the modern functions of Guangzhou port.
- Expansion of the BaiyunAirport in Guangzhou.
The city has more than 2000 years of history, the same as Rome, according to the city government. As an ancient capital of commerce, Guangzhou has served as a major starting point of the ancient Maritime Silk Road, a route of inter-Asian and cross-continental trade since the Tang Dynasty, and the centre of Lingnan Culture.
Now, in what the government refers to as “the post-Asian-Games era”, the city government’s FYP aims to emphasise Guangzhou’s historical legacy and transform it into an international cultural city with a cultural identity on a par with its economic might and fitting of a modern international metropolis.