China’s first type of development zone was the special economic zone (SEZ), which was introduced in Shantou, Shenzhen, Xiamen and Zhuhai in 1979. The aim of introducing the SEZ was to attract foreign direct investment and to test if the economy could become more capitalistic and liberal. Another goal was to stimulate exports while trying to prevent any harm to state-owned enterprises.
Recently, however, there have been many changes. China’s 2008 Corporate Income Tax Reform, for instance, reversed many key tax incentives that were previously offered. Also, many foreign enterprises currently focus on domestic sales instead of exports.
Nevertheless, development zones are still a great success in China. This is mainly because the business environment tends to be less bureaucratic. Development zones also offer a great availability of resources, well developed infrastructure, reserved land, favorable policies and strategic locations.
The main types of development zones in China currently are free trade, economic and technological development, hi-tech industrial development, special economic, export processing, bonded logistics and cross-border economic zones.
Dongguan has one development zone, the Dongguan Songshan Lake National Hi-tech Industrial Development Zone. Established in 2001, it reached the national level in 2010.
Hi-tech development zones are focused on commercializing research and development and encouraging technology-heavy industries such as electronics, pharmaceuticals and IT. Although this type of zone is to a certain extent similar to an economic and technological development zone, the hi-tech development zones offer incentives such as favorable corporate income tax rates.
The Dongguan Songshan Lake National Hi-tech Industrial Development Zone is divided into the northern district, eastern district, central district and the lakeside district. The corporate headquarters, research and development centers and high-tech firms are mostly located in the northern district, which is referred to as the High-Tech Industrial Belt. The Taiwan-invested high-tech and research and development firms are mainly located in the eastern area, called Taiwan High-Tech Park. The Central District, called Education and Research and Development District, is focused on business, administration, research and development, education, commerce, tourism and residence. The Lakeside District is focused on tourism and is a location where many firm’s headquarters are located.
The main industries in the zone are the high-end electronic info, communication and components industries. The second biggest industry is the bio-technological industry. The financial services industry is the third biggest industry within the zone, followed by the e-commerce, cultural and creative industries.
Dongguan’s development zone aims to improve the ecological environment and the co-development of society, economy, nature and resources. Over the next few years Songshan Lake plans to build several research institutions together with 10 to 15 universities.
Songshan Lake, in 2012, funded 181 science and technology projects from 71 companies for a total amount of nearly RMB 10 million. These funds are categorized as incentives funds, subsidies funds and patent supporting funds. In the case that a company is identified as a national high-tech enterprise, it can receive an incentive fund of RMB 200,000.
Following is the application procedure for investing in Songshan Lake National Hi-tech Industrial Development Zone:
- Meet with the Investment Service Center
- Fill out application form
- Approval of environmental protection
- Verification of the enterprise’s name
- Approval of the feasibility report and contractual regulations
- Coding of enterprises artificial person
- Obtain certificate of approval
- Obtain business license
- Carve company seals
- Obtain an enterprise legal person code
- Tax registration
- Open bank accounts
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