Qianhai, the special economic zone in Shenzhen, is rolling out a 1.2 billion yuan incentive programme next month to attract Hong Kong businesses. The deep-pocketed Qianhai authorities are offering up to 3 per cent discounts on each loan a Hong Kong company borrows in the special zone. The incentive for each firm is capped at 2 million yuan for every two years. A Hong Kong company planning to set up an entity in the zone also will be entitled to a one-time subsidy of no more than 200,000 yuan or half of its registered capital, whichever is smaller. Both incentives will take effect officially from the start of next month and are seen as the boldest move by the zone to attract Hong Kong companies since the establishment of the zone more than four years ago. The zone, which says it aims to become the Manhattan of the Pearl River Delta by 2020, had set a target of having a third of its companies from Hong Kong, yet this representation was only 5 per cent by December. "We had an ambition of attracting at least 100,000 companies to Qianhai by 2020. It looks like a tough goal, tougher than we had expected, but our goal hasn't changed," Rong Weihua, director of Qianhai's investment promotion department, told the South China Morning Post. Separately, Rong said the Qianhai authorities were in talks with several insurance firms in Hong Kong for them to set up shop in the zone. They are also working on incentives to attract angel investors, he said, without elaborating. Only 1,022 out of the total 20,216 companies registered in Qianhai are from Hong Kong, according to Hua. In comparison, Hengqin, the economic zone near Macau, has attracted more than 400 firms from the gaming hub, a feat given that Hong Kong's economy is over three times Macau's and Hengqing is a year younger than Qianhai. Mostly a barren expanse dotted with construction sites, Qianhai is still struggling to convince Hong Kong entrepreneurs to move there. "The number of Hong Kong firms is small, yet the quality is high. In terms of average registered capital, each Hong Kong firm is around 96 million yuan, compared with the zone's average of 65 million yuan," said Rong. To many companies, Qianhai's most attractive policy incentive is the cross-border yuan loan programme. This allows firms registered there to borrow offshore yuan directly from Hong Kong banks, with the interest based on market rates. As of December, the zone's firms have borrowed 15 billion yuan from Hong Kong banks, with a further 45 billion yuan awaiting the approval of the People's Bank of China in Shenzhen, said Rong. Qianhai offers a 15 per cent corporate income tax to companies in several industries and 15 per cent individual income tax for eligible employees. The Shanghai free-trade zone, in comparison, subjects all firms to 30 per cent corporate income tax. However, financial companies, which comprise more than 70 per cent of Qianhai's registered firms, do not enjoy such incentives. Peter Kung, senior partner at KPMG and committee member of the Chinese People's Political Consultative Conference in Shenzhen, said a proposal has been sent to the government to withdraw or lower the withholding tax on dividend payouts.