Qianhai economic zone reaches 100,000 registered firms but very few are operating
Qianhai has reached the milestone of 100,000 companies registered in the special economic zone next to Shenzhen but the real challenge will be to see these firms begin operations in the zone, according to an executive with the authority in charge of the project.
Hong Kong lawmakers have also urged Qianhai to open itself up more for brokerage firms and accountants.
“It is good that we already have 100,000 companies registered in Qianhai. As the next step forward, we would like to see many of these companies begin to operate in Qianhai,” said Witman Hung, principal liaison officer of the Hong Kong office of the authority managing Qianhai.
Companies that are registered in Qianhai and meet certain criteria are assessed on a preferential tax rate of 15 per cent, compared with the conventional 25 per cent. Qualifying individuals are assessed on a 15 per cent rate, against the standard 40 per cent.
This has attracted many Hong Kong, mainland and multinational firms to set up in Qianhai to take advantage of these benefits. Hung said on Wednesday that as of June 15 there were 100,000 companies registered in Qianhai with total capital base of 4.971 trillion yuan (HK$5.779 trillion), 10 times more than in 2014.
Among them, 3,306 companies are from Hong Kong with a total capital of 387.1 billion yuan.
However, the vast majority of the registered firms were not operating on site in Qianhai, with only a few hundred, such as HSBC, having set up branches in the Qianhai area while some are renting offices in Shenzhen or other nearby areas at the moment.
“There are many companies that want to start their operation in Qianhai but there is a lack of offices and related facilities. Many office buildings and the infrastructure like roads and railways are still under construction,” Hung said.
Hung believes the situation should improve by the end of this year when more offices and public transportation facilities are completed, while the whole construction project is not expected to be finished until 2020. “When companies find it convenient and comfortable to set up offices in Qianhai, they will come.”
Qianhai, located next to Shenzhen and only one hour by car from Hong Kong, focuses on financial services, logistics, technology and start-ups. As part of its mission to encourage more start-up companies from Hong Kong and Shenzhen to use Qianhai as a base for their development, the authority has launched a competition to invite start-ups to present their business plan and compete for 12 awards totalling at HK$1.2 million, including one-year free rent in a Qianhai office.
“The idea is to encourage young people in both Hong Kong and Shenzhen to try and establish more start-ups to develop their creative ideas into real business plans,” Hung said.
He said 60 Hong Kong firms showed interest in the competition, with applications closing on July 20 and the awards given on December 7.
While several major Hong Kong firms have plans to set up or further expand in Qianhai, those in the accounting and brokerage industries still say they have found it hard to develop in Qianhai due to many operating restrictions.
Kenneth Leung Kai-cheong, Hong Kong lawmaker for the accountancy sector, said Qianhai should allow Hong Kong accountants to open firms in the economic zone.
“It is also important for Qianhai to open up its internet access to allow companies to use social media or other internet [services],” Leung said. “People nowadays cannot use Facebook or Twitter in Qianhai while many websites are banned. The securities or accounting firms setting up there would not be able to freely access the information they need,” he said.
Christopher Cheung Wah-fung, Hong Kong legislator for the financial services sector, said the mainland has only allowed HSBC to take a majority stake of a joint venture securities firm. Normally foreign firms can only hold a minority stake. “We want to see more Hong Kong firms be allowed to have majority stakes in joint venture securities firms,” he said.
Bank of East Asia, Credit Suisse and Hang Seng Bank also have plans to expand in Qianhai this year while nine legal firms have received approval to set up partner firms in the economic zone.