Located in the western part of Shenzhen and the east bank of the Pearl River Estuary, the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (Qianhai Zone) is a major initiative for strengthening cooperation and interaction between Hong Kong and Shenzhen.
Besides being a modern service industry cooperation zone, Qianhai is also designated as part of the China (Guangdong) Pilot Free Trade Zone, which enables Qianhai to benefit from a wide range of free trade policies. The Qianhai Zone, which covers an area of 120.56 square kilometres —formerly covering 14.92 square kilometres — and includes the Convention and Exhibition New Town, Ocean New Town Area, Shenzhen Bao’an International Airport and surrounding area, Bao’an Centre and Da Chan Bay Area, Shekou and the two Big and small Nanshan sub-districts. The international airport, two railway stations and six port terminals provide convenient access to the zone. The planning of a railway link to the western New Territories will further facilitate its connection with Hong Kong, making the half hour travel connection with Hong Kong and one hour living zone within the Greater Bay Area (GBA) feasible.
As Mainland China’s premier modern service industry cooperation platform with Hong Kong, the Qianhai Zone is a prominent driving force behind broadening cooperation between Shenzhen and Hong Kong as well as promoting the Belt and Road Initiative. Qianhai Zone focuses on the promotion of modern services industry including finance, modern logistics, information services, science and technology services and professional services. The Qianhai Zone also offers a number of unique advantages on piloting reforms and preferential policies. For example, 15% corporate and individual income tax, a cross-border RMB loan pilot scheme, a pilot area for Qualified Foreign Institutional Investors (QFII) and Qualified Foreign Limited Partnership (QFLP) schemes, a cross-border intra-group two-way RMB fund pool, international arbitration, commercial courts and recognition of Hong Kong’s finance, accounting and legal professional qualifications.
The Qianhai Zone continues to attract a large number of foreign investors, especially Hong Kong companies. Under the new policies on office rental subsidy, Hong Kong invested companies registered in Qianhai can enjoy 1.2 times compared to others. As of April 2022, 11,900 Hong Kong invested companies have registered in the Qianhai Zone. Among them, 22% (2,571 companies) were from the financial service industry. Collectively, 122 Qianhai-Hong Kong invested QFLP companies manage total assets of RMB 40 billion, accounting for about 95% of all assets under management in Shenzhen.
Opening up creates new opportunities
On 6 September 2021, the State Council had published the “Plan for Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone” (Qianhai Plan). The Qianhai Plan is designed to further open up the Qianhai Zone to the international business community. The Plan will promote financial market interconnection with Hong Kong, the cross-border use of RMB and easier foreign exchange management. Specific measures proposed include pilot projects for combined local and foreign currency bank accounts and support for eligible financial institutions to carry out cross-border securities investment. The plan will also support the development of international insurance institutions in the Qianhai Zone that will provide services for overseas business activities of Mainland Chinese enterprises. To support the national net-zero goals, the plan will seek to deepen cooperation between Guangdong, Hong Kong and Macao on green finance, explore the establishment of green finance standards and provide services for Mainland enterprises to tap into the Hong Kong and Macao financial markets for green financing. Meanwhile, new mechanisms for cross-border trade finance and international payment clearing will also be explored.
On the legal and compliance front, the Plan intends to support the research and application of Regtech projects and pilot schemes that can help to streamline compliance with regulatory and listing requirements. It will also support Hong Kong Exchanges and Clearing Limited’s Qianhai Mercantile Exchange (QME) to carry out spot trading of commodities in accordance with the law. A monitoring system that can provide early warnings and process executions will also be developed to improve the ability to prevent and mitigate financial risks in the Qianhai Cooperation Zone.
To implement the Qianhai Plan on the expansion of opening up the financial industry, the Qianhai Shenzhen-Hong Kong International Financial City in the Guiwan and Qianwan areas was officially launched on 28 October 2021. Covering an area of 2.3 square kilometres, the Qianhai Shenzhen-Hong Kong International Financial City is designed to further promote financial cooperation between Hong Kong and Shenzhen. As a platform for financial innovation, the International Financial City is expected to become the “first stop” and “first choice” for Hong Kong’s financial industry sector to expand into the Mainland China market and support Hong Kong’s financial industry integration into the Mainland’s latest financial reforms and liberalisation.
As of April 2022, Shenzhen-Hong Kong International Financial City has signed contracts with 177 financial institutions to be located in the area, of which about 30% are Hong Kong or foreign invested companies. The first residents have moved into the Qianhai Kerry Centre, China Resources Qianhai Building T5 and Hongyi Building. Occupancy rate has reached 75%. Eligible enterprises can enjoy special subsidies for leasing or purchasing office space offered in the Qianhai Zone.
In another significant development, on 22 November 2021 the Qianhai Authority issued the “Measures for the Administration of Special Funds to Support the Development of the Financial Industry”, (the measures). The new directive covers 16 financial cooperation policies between Shenzhen and Hong Kong. Eligible foreign enterprises that set up private equity funds, including QFLP, wholly foreign-owned enterprises and private securities investment fund managers in the Qianhai Cooperation Zone will be granted a “settle in” incentive of between RMB500,000 to RMB1 million. Also, eligible Hong Kong commodity spot trading companies will be granted an incentive of up to RMB15 million. Qualified Financial Institutions that build their headquarters in Qianhai will also be granted RMB5 million to RMB50 million or RMB1 million to RMB10 million as “settling in” incentives.
A series of policies and incentives to attract and retain talent has also been successively introduced. For example, eligible professionals including architects, surveyors and engineers can practice in Qianhai after registration without taking exams. Other professionals such as solicitors, tourist guides, accountants and tax accountants are required to take an exam. On 1 May 2022 a new policy was launched to support youths from Hong Kong and Macao to set up companies or to seek employment in the GBA. It is believed the new policies can be beneficial to young talents and incentivises them to start their careers in Qianhai.
Building on momentum
Ever since the cross-border RMB loan policy was introduced to Qianhai in 2012, various regulatory bodies at the provincial and municipal level have issued a series of policies with the aim of promoting the implementation of QFLP and two-way cross-border financial schemes, including Shenzhen-Hong Kong Stock Connect, Southbound Bond Connect and Cross-border Wealth Management Connect (WMC) schemes. Recently launched policies include “Measures for the Management of Special Funds for Supporting the Development of the Financial Industry”.
Statistics show that since the launch of the WMC scheme in September 2021, 12 pilot banks have set up business operations in Qianhai. Eight banks have participated in the cross-border RMB pilot schemes, enabling them to provide integrated multi-currency bank account services. A growing number of enterprises are using the pilot cash-pool scheme to integrate domestic and foreign currencies. Hong Kong and Macao residents have also opened more than 180,000 personal accounts with mainland banks thru agent witnessing arrangements.
As Qianhai continues to expand and develop, it will form a high level synergised platform for the development of the financial industry in the GBA.
About the author
Prof Witman Hung, JP, Principal Liaison Officer for Hong Kong of the Shenzhen Qianhai Authority
(Published in China World on June 28, 2022)