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A Tale of Integrated Development: Shenzhen-Hong Kong Innovation and Technology Co-operation Zone

  • Hong Kong and Shenzhen have joined hands to develop a preeminent global innovation and technology hub in the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone at the Lok Ma Chau Loop.
  •  A joint policy package has been introduced to promote collaboration and the “synergistic development” of the Co-operation Zone, setting out a wide array of funding schemes, support measures and resource-sharing initiatives available to qualified enterprises. 

Photo by SSDPenguin, at English Wikipedia – Own work by the original uploader, CC BY 3.0, Link 

Background

Hong Kong and Shenzhen have joined hands to develop a preeminent global innovation and technology hub in the Greater Bay Area (“GBA”) through the signing of the Co-operation Arrangement on the Establishment of “One Zone, Two Parks” in the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone (“Co-operation Zone”) at the Lok Ma Chau Loop in September 2021. Straddling both sides of the border, the Cooperation Zone lends itself to being a very fitting spatial embodiment of the unique advantages bestowed by the “one country, two systems” framework. The integrated development of the two cities is of key strategic importance, allowing for a more efficient harnessing of synergies, while at the same time facilitating a better positioning of the cities’ respective roles within the GBA – with Hong Kong as a “super connector” and international financial centre, and Shenzhen as a special economic zone and the national hotbed of innovation. A joint policy package has been introduced to promote collaboration and the “synergistic development” of the Co-operation Zone. It sets out a wide array of funding schemes, support measures and resource-sharing initiatives available to qualified enterprises. 

Across approximately 540 hectares, the Co-operation Zone is made up of the Hong-Kong Shenzhen Innovation and Technology Park (“the Park”) in the Lok Ma Chau Loop (“the Loop”) and the Shenzhen Innovation and Technology Zone (“Shenzhen I&T Zone”) situated adjacent to the Loop and along the northern bank of the Shenzhen River. The Park and the areas surrounding Lok Ma Chau and San Tin will also be integrated to form the San Tin Technopole. Developed in two phases with each phase divided into three batches, the Park will comprise 67 buildings in total. The first phase consists of 31 buildings with a gross floor area of approximately 540,000 square metres; the second phase consists of 36 buildings with a gross floor area of around 660,000 square metres. Funding to the tune of HKD 32.5 billion has been earmarked for the construction of the first batch of eight buildings and the initial operating cost of the Park. With works in full swing, the initial eight buildings are to be completed from the end of 2024 onwards. 

Use of buildings, number of buildings and estimated floor area of Batch 1 development of the Hong Kong-Shenzhen Innovation and Technology Park
Technological innovation at the heart of national development policy 

One of the five key policy areas in the 14th Five-Year Plan (“the Plan”) promulgated in March 2021, research and innovation have been at the forefront of the Chinese government’s national development agenda. In furtherance of high-quality development, priority is given to the formation of global science and technology innovation centres in the GBA. A vital role of the GBA, as delineated in the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area issued in 2019, is to support the implementation of the innovation-driven strategy. It is also worth teasing out the governmental backing for Hong Kong to become an international innovation and technology centre. The materialisation of the Co-operation Zone, therefore, very much dovetails with the Plan, which consistently names innovation-driven development as the mainstay. For the very first time, explicit mention of the Co-operation Zone as one of the four collaborative platforms in the GBA was made in the Plan, reinforcing the sheer importance ascribed to the cross-border endeavour.  

Ever since it was floated by the Chinese government in 2020, the term “dual circulation” to refer to the newly adopted development paradigm has garnered much attention and curiosity as to its precise meaning. Although taking domestic consumption as the cornerstone and accelerating the shift away from the export-led development model, “dual circulation” can by no means be simply equated with self-sufficiency or a stimulation of domestic consumption. At the core of the paradigm is the drive for sustainable domestic economic development through, among other things, comprehensively upgrading industrial chains and supply chains so that they become “higher value-added” with “stronger innovation capabilities”. According to Zhu Min, Head of the National Financial Research Institute at Tsinghua University: “Technological innovation is a major strategic point for the ‘dual circulation’ development pattern in China.” And it can, of course, not do without first-class facilities and infrastructure. 

Hong Kong and Shenzhen: A continuing journey of joint and integrated innovation

Hong Kong’s tale of development has always been closely intertwined with that of its neighbour. In the early days, the “front shop, back factory” model, which refers to a geographical division of labour, was adopted: Shenzhen, where there was abundant low-cost labour, became the de facto base for labour-intensive production processes for industrial enterprises in Hong Kong – whose economy was in turn restructured as a result and became increasingly service-oriented. By 1988, 70% of external investments in Shenzhen came from Hong Kong companies, which made up 85% of enterprises originating from outside mainland China. Things have evolved by leaps and bounds since then. Shenzhen has ascended the industrial value chain: the focus has shifted to higher value-added and capital-intensive outputs with an emphasis on homegrown technology. The city has become the new frontier of technology, having successfully nurtured to growth and prosperity world-renowned tech enterprises, such as Huawei and Tencent, as well as being considered an ideal location for the establishment of R&D centres for international companies, such as Apple and Siemens. According to the 2021 Global Innovation Index Report published by the World Intellectual Property Organisation, the Shenzhen-Hong Kong-Guangzhou science and technology cluster is the world’s second best performing after the Tokyo-Yokohama cluster.  

In addition to being identified as the core engine in steering the development of the GBA, Shenzhen’s technological prowess is eclipsing that of Hong Kong, some may argue. Rather than pitting Shenzhen against Hong Kong, however, one should view it an opportunity for joint and integrated innovation, as well as for Hong Kong to better leverage its own strengths as an international financial centre to fulfil its role as a fundraising platform within the GBA. The concept of “twin cities, three circles”, which was introduced by the Hong Kong government in 2021, again epitomises the primacy of integrated development. The “three circles” refer to the Shenzhen Bay Quality Development Circle, Hong Kong-Shenzhen Close Interaction Circle (including the Loop), and the Mirs Bay/Yan Chau Tong Eco-recreation/tourism Circle.  

Coordinated innovation between the two cities can enable synergies to be more effectively harnessed across value chains, as well as fostering the development of comprehensive and integrated value chains within the GBA. Examples of areas which would particularly benefit from further advancement are biotechnology and artificial intelligence. Designated one of the strategic emerging industries in the Plan and a key pillar industry for development in the GBA, biotechnology offers very promising potential with its global market size projected to reach USD 2.44 trillion by 2028. The University of Hong Kong and the Chinese University of Hong Kong excel in this field of research, and their biotech departments have consistently been ranked highly in the QS World University Rankings. As of September 2021, there were 214 start-ups operating in the biotech, medical and health industries in Hong Kong. Shenzhen also has the capacity and a sound value chain in place to industrialise the fruits of research efforts.  

Similarly, precedence is given to the development of artificial intelligence to boost indigenous innovation. According to the Shenzhen New Generation Artificial Intelligence Development Action Plan (2019-2023), Shenzhen is to transform into a premier AI (Artificial Intelligence) application pilot zone by 2023. As of the end of 2020, it was home to 1,318 AI companies, and approximately 26% of China’s AI companies were set up in the GBA. Its counterpart, Hong Kong, has a long track record of being at the forefront of cutting-edge AI R&D. In addition, there were six AI-based companies out of the 18 fintech unicorns that were listed in 2021. By capitalising on Shenzhen’s value chains in the field of AI and the opportunities arising from the Qianhai Plan, which is another cooperation zone to strengthen Hong Kong-Shenzhen ties as well as to boost business competitiveness and regional economic integration, Hong Kong can create fresh impetus for AI enterprises and fintech unicorns to expand across the border.  

The Co-operation Zone will provide the requisite infrastructure for both cities to give full scope to their respective as well as complementary strengths in the realm of science and technology. More importantly, it will help to solidify links along the whole industry value chain to facilitate a more efficient conversion of research work into products and services. The creation of a comprehensive cross-border industrial ecosystem will no doubt be a boon to regional integration and development; the influence of such an ecosystem is also likely to extend beyond the GBA into the global arena.  

Joint Policy Package for the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone in the Loop

The main target entities are leading international scientific research institutes, R&D-focused enterprises, transfer and incubation platforms, and other institutions and talents based in Hong Kong (or with Hong Kong elements) or Shenzhen (or with Shenzhen elements).  

Their work should fall under one of the Co-operation Zone’s main research areas: big data and AI, financial technology, healthcare technologies, microelectronics, new materials, robotics, as well as future-oriented technology exploration. 

Applicants shall meet one of the following conditions: 

  • It must be either an enterprise that is a separate legal entity or a scientific research entity set up in the Shenzhen I&T Zone; 
  • It must be a public scientific research institute in Hong Kong, an R&D centre established under the Innovation and Technology Fund, or an innovation-oriented entity, such as an incubatee or a tenant of a public organisation in Hong Kong that promotes scientific research under the abovementioned fund. 

Eligible candidates are invited to submit applications to the competent authority on either the Hong Kong or Shenzhen side. 

In respect of scientific research projects to be jointly supported by Hong Kong and Shenzhen, applicants shall submit separate applications for the same project on their respective sides. An independent assessment will be carried out by both sides, and subject to endorsement by both sides the project will be approved for funding support.  

Programmes to attract scientific research talents include the Young Scientists Fostering Programme, Scientific Research Teams Award Scheme and Talents Joint Fostering Programme under the Support Measures for Scientific Research, Innovation and Startups in the Shenzhen Park of the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone in the Loop (details thereof below), as well as the Technology Talent Admission Scheme and Quality Migrant Admission scheme of Hong Kong, etc. 

An “InnoAcademy” will be set up in the Shenzhen I&T Zone to serve as a resource centre, training hub and exchange platform to support talent development. 

An “InnoExpress” will be set up to nurture innovation and technology enterprises and assist Hong Kong and overseas enterprises wishing to expand into the GBA, as well as mainland Chinese enterprises looking to tap into overseas markets. 

A synergistic and innovative medical system will be established for scientific research activities in the field of biomedicine, leveraging the resources of Hong Kong and the University of Hong Kong-Shenzhen Hospital Translational Medicine Research Centre. The aim is to deepen cross-border collaborative ties and encourage Shenzhen and Hong Kong to participate in international clinical trials.  

The sharing of technology resources between Hong Kong and Shenzhen shall be promoted through the compilation of lists of devices and equipment necessary for conducting research work by the Innovation and Technology Commission in Hong Kong on a regular basis 

The provision of professional support available to enterprises shall be enhanced by encouraging professional services providers such as law firms, accounting firms and financial institutions from Hong Kong to set up branches in the Shenzhen I&T Zone.  

Accessible and cost-effective online dispute resolution services will be available to enterprises through Hong Kong’s Electronic Business-Related Arbitration and Mediation Platform. 

A wide range of funding and match-investment schemes will be available to eligible start-ups in the Co-operation Zone. Both Hong Kong and Shenzhen governments will co-invest with social or private capital based on a ratio of no more than 1:1. Hong Kong’s Innovation and Technology Venture Fund can invest in eligible start-ups from Hong Kong in the Shenzhen I&T Zone. Start-ups from Hong Kong can also apply for Shenzhen’s Innovation and Pilot Test Fund and the “RMB 10 billion+ Fund for Excellent Research” 

The import and export clearance of scientific research samples, experiment reagents and genetic resources will be streamlined subject to a risk-based classification.  

Cross-border investment and financing channels will be expanded, and support will be provided to help enterprises finance through Hong Kong. In the case of mergers and acquisition, Hong Kong’s expertise in financial services shall be enlisted.  

Safe cross-border data flows will be promoted, and cooperation in respect of AI and data analysis will be strengthened. 

Support Measures for Scientific Research, Innovation and Start-ups in the Shenzhen Park of the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone in the Loop (“Support Measures”)

Big data and AI: core AI algorithms, speech-semantic recognition, machine vision, big data storage, processing, and security. 

Financial technology: blockchain cryptographic algorithms, distributed data storage, peer-to-peer transmission, consensus mechanisms and smart contracts, distributed storage, and distributed computing. 

Healthcare technologies: AI+ drug development, advanced medical devices, key technologies for clinically scarce new drugs, new generation of targeted chemical drugs, antibody drugs, cellular drugs, genetic drugs, etc. 

Microelectronics: high-end chip design and process R&D, EDA tool and system development, high-end IP (Intellectual Property) product R&D and advanced packaging and testing technology. 

New materials: semiconductor materials, additive manufacturing, high energy density battery materials, biomedical materials, and graphene materials. 

Robotics: robot sensing balance and control technology, human-robot interaction technology and autonomous navigation. 

  • To promote the R&D of core technologies and equipment for the construction of major science and technology infrastructure, a subsidy will be granted, covering a maximum of 50% of the total project investment, with the amount of subsidy not exceeding RMB 20 million and not exceeding RMB 50 million for large-scale projects.
  • To support the construction of proof-of-concept testing, small/pilot testing platforms with the aim of accelerating the efficient transformation of processes, technologies, and products from laboratory to industrial application, financial support covering up to 50% of the total project investment (up to RMB 50 million) will be provided.  
  • To support the industrialisation of R&D work in the Shenzhen Park, financial support covering up to 30% of the total project investment (up to RMB 50 million) will be provided.  
  • To support industrialisation projects with a significant leading and driving role for the overall development of the Shenzhen Park, financial support will be given ex post facto, covering 10% of the total project investment (up to RMB 50 million).
  • To support the recruitment of well-qualified talents through reputable domestic or international recruitment agencies, a subsidy will be given, covering up to 50% of the commission paid by the enterprise to the agency (up to RMB 150,000 for each imported talent). The annual support for a single enterprise shall not exceed RMB 1 million. 
  • To support enterprises in pledging their intellectual property rights, a subsidy will be given at 60% of the Loan Prime Rate (LPR), up to RMB 2 million per year per enterprise. In addition, financial support will be provided in the case of intellectual property rights disputes, covering 50% of the cost of arbitration, up to RMB 150,000 per case per enterprise and up to RMB 1 million per year in total. 

For enterprises whose projects have been approved and have received relevant funding detailed in the Support Measures, a rental subsidy scheme will be available subject to the following conditions:  

  • A subsidy covering 70% of rental costs for premises not exceeding 2,000 square metres will be granted to enterprises engaged in the R&D of core technologies, or international organisations for industry or standardisation. 
  • A subsidy covering 50% of rental costs for premises not exceeding 3,000 square metres will be granted to enterprises engaged in the construction, development and operation of industrialisation support platforms, proof-of-concept testing platforms, or small/pilot test platforms; 
  • A subsidy covering 50% of rental costs for premises not exceeding 800 square metres will be granted to service enterprises at the Shenzhen Park engaged in the provision of talents, attraction of projects and enterprises for international organisations for industry or standardisation; 
  • A subsidy covering 30% of rental costs for premises not exceeding 5,000 square metres will be granted to enterprises engaged in major industrialisation projects.  
Funding Scheme to Support Internship, Employment, Innovation and Entrepreneurship of Young People from Hong Kong and Macao in the Shenzhen Park of the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone in the Loop

“Young people” are defined as persons who meet the following criteria:  

  • Resident of Hong Kong or Macao, or Mainland resident who has graduated from a university in Hong Kong or Macao; 
  • Between the age of 16 and 45; 
  • Law-abiding, uphold the “one country, two systems” policy and have no record of illegal conduct or misbehaviour within or outside the country. 

Start-up enterprises of young people from Hong Kong and Macao are those which are legally registered and established in the Shenzhen Park, have a fixed business abode and operating in compliance with rules and regulations. In addition, they shall meet the following conditions:  

  • The percentage of shares held by the young team members who are from Hong Kong and Macao in the enterprise is 25% or more; 
  • If the young people from Hong Kong and Macao use an overseas enterprise as the shareholder of the enterprise registered in the Shenzhen Park, the proportion of shares held by them in the overseas enterprise shall not be less than the proportion mentioned above; 
  • Prior to the application for funding, the enterprise should have been incorporated for fewer than five years and its business revenue in the previous year should be less than RMB 50 million. 

Enterprises and institutions based in the Shenzhen Park whose work is in line with the key focus areas can provide internship positions to young people from Hong Kong and Macao. They can receive a subsidy of RMB 2,250 per month for each undergraduate student, RMB 3,750 per month for each master’s student and RMB 6,750 per month for each doctoral student. The duration of the internship shall be at least one month but no more than six months.

Young graduates from Hong Kong and Macao working full-time for Shenzhen Park enterprises and institutions whose work is in line with the key focus areas of Shenzhen Park can be given a one-off living subsidy of RMB 20,000 for those enrolled on undergraduate programmes, RMB 30,000 for those enrolled on master’s programmes, and RMB 50,000 yuan for those enrolled on doctoral training programmes, providing they meet the following conditions: 

  • Have a full-time bachelor’s degree or above, and the degree is the same as that stated in the application submitted when applying for the subsidy; 
  • Have signed an employment contract with an enterprise or institution based in the Shenzhen Park for a period of more than one year within five years from the date of issuance of the degree certificate. 

The Shenzhen Park provides a free seven-day hotel stay for young people from Hong Kong and Macao. Those who are working as interns or employed by enterprises and institutions in the Shenzhen Park can apply for one month’s rent-free support at the Futian Talent Station, and those who have signed a formal employment contract can enjoy a 50% discount on rent for a maximum period of one year. 

Start-up entrepreneurship subsidy for young people from Hong Kong and Macao 

Young entrepreneurial teams from Hong Kong and Macao that are legally registered and have been operating in a compliant manner in the Shenzhen Park for more than one year may apply for the subsidy, providing they meet one of the following conditions: 

  • For those who have received funding from the Hong Kong Home Affairs Bureau, Hong Kong Youth Development Commission, Hong Kong Innovation and Technology Commission, Hong Kong Science and Technology Parks, Hong Kong Cyberport, Macao Economic Services Bureau, Macao Youth Business Incubation Centre, and Taiwan Industrial Technology Research Institute, they will be given a 1:1 matching subsidy based on the actual amount of funding; 
  • For those who have received funding from the Innovation and Entrepreneurship Funding Scheme set up by universities in Hong Kong and Macao, a 1:1 matching subsidy will be given based on the actual amount of funding; 
  • For those who have won the first, second and third prizes in innovation and entrepreneurship competitions at national or provincial level, or in relevant competitions organised by government departments of Hong Kong, Macao, Guangzhou, and Shenzhen, a 1:1 matching subsidy will be given. For those who have won multiple awards, they may choose the highest award amount when applying for the subsidy. 

The maximum amount of one single subsidy shall not exceed RMB 1 million. Those that meet two or more above-mentioned conditions can enjoy multiple subsidies up to a total of RMB 1 million.

One-off incentives for young entrepreneurial teams 

Young start-ups from Hong Kong and Macao that are legally registered and have been operating in a compliant manner in the Shenzhen Park for more than one year will be eligible for the following incentives, subject to certain conditions: 

  • A one-off incentive of RMB 100,000 will be available to start-ups whose annual business revenue is above RMB 1 million within the first year of incorporation and whose R&D investment accounts for more than 3% of business revenue; 
  • A one-off incentive of RMB 500,000 will be available to start-ups that have received a cumulative investment of more than RMB 5 million within two years of incorporation, or whose business revenue in the previous year is above RMB 5 million; and there are more than two persons from Hong Kong and Macao who have worked in the enterprise for one year or more.