20b yuan development fund for hi-tech industry to be set up The State Council has set the tone for the development of Tianjin's Binhai New Area, giving its backing to financial and land reform experiments along with promising a wealth of tax breaks to investors and subsidies to local authorities. In a circular released to the public yesterday, the central government said the project would transform the city into a northern gate for China's opening up to the world, a modern manufacturing and industrial research and development centre, and an international shipping and logistics base. Beijing also hopes the municipality can give a boost to other cities around the Bohai Sea, which borders the provinces of Hebei , Liaoning and Shandong . The development of the Binhai New Area comes amid a national drive by Beijing to ensure more equal development among regions. The 2,270 sq km zone would be a national experimental ground, where 'important reform and opening measures' would be tested before being rolled out nationwide, the circular said. The State Council encouraged the zone to implement financial innovations in industrial investment, venture capital, institutional ownership structures, foreign exchange administration and offshore financial services. Song Lianxin , the area's administrative committee deputy director, said the fiscal changes were well under way. 'We started innovating before getting the nod from the central government. For instance, we have established the Bohai Bank and the Bohai industrial fund,' he said. Tianjin Mayor Dai Xianglong , a former central bank governor, used his financial expertise to set up the Bohai Bank at the end of last year. It was the first national bank approved since 1996 and the first mainland bank to have a foreign investor - Standard Chartered - as a founding partner. The State Council has also approved the establishment of a 20 billion yuan Bohai industry development fund to encourage hi-tech industries in the area, even though the mainland has no legislation covering such funds. 'There will also be preferential treatment in the form of tax policies and innovations in land management systems. We submitted a draft plan in April, but it's still hard to say when we will finish the planning,' Mr Song said. The State Council circular said a 15 per cent income tax rate would be granted to qualified hi-tech businesses throughout the Binhai area. Domestic companies are expected to benefit from a higher taxable income threshold and accelerated depreciation for fixed and intangible assets. Mr Song said the policy's backers hoped the incentives would attract more overseas investors and domestic innovators to Binhai, given the mainland's plans to unify the corporate tax rate for foreign and Chinese companies. Yi Xianrong , a finance researcher at the Chinese Academy of Social Sciences, said the preferential policy showed that while Beijing could set the tax rate, local governments could still find ways to offer concessions to attract foreign investment. 'The central government should be tough because China does not have a capital shortage, like decades ago. It's really unnecessary to attract investment by doing this. Shenzhen sets a good example in attracting hi-tech companies. Tax policies do not matter much. The important thing is its appeal to talent and a culture encouraging innovations,' Mr Yi said. Lu Zhiqiang , of the State Council Development Research Centre, said the mainland still needed policies to overcome obstacles and improve co-ordination among the Bohai rim cities. 'The total GDP of Beijing and Tianjin surpasses Shanghai. But their capacity to bring opportunities to neighbouring cities is dwarfed by Shanghai's role in relation to Yangtze River Delta cities,' Mr Lu said.