Nansha, an administrative district strategically located in south of Guangzhou and the Pearl River estuary, is designated as the demonstration zone of all-round cooperation among Guangdong, Hong Kong and Macao (hereinafter as “Nansha Cooperation Zone”) and aims to attract both foreign and domestic capital, and facilitate research and development (R&D) and international trade.
In June 2022, China’s State Council published the Master Plan of Guangzhou Nansha on Deepening Comprehensive Cooperation between Guangdong, Hong Kong and Macao with Global Perspective, also known as the Nansha Plan.
Following the implementation of the Nansha Plan, Nansha has witnessed significant progress and success. The economic and social development of the Nansha district in 2022 soared to new heights, registering a Gross Domestic Product (GDP) of approximately 225 billion RMB (about 33 billion USD). This represented a year-on-year growth of 4.2 percent, placing Nansha at the top in terms of growth rate among Guangzhou’s districts.
This article offers an overview of the Nansha Plan, highlighting the advantageous policies within the Nansha Cooperation Zone and showcasing examples of successful foreign enterprises that have thrived in this area.
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International Business Environment in Guangzhou
Guangzhou has a total area of 7434.40 km², housed a resident population of 18,734,100 across its 11 districts by the end of 2022. As the capital of Guangdong province, Guangzhou is the centre of politics, economy, science, and education of the province, China’s Southern Gateway, an international trade centre and a comprehensive transportation hub. The city is a famous cultural city with a history of more than 2,200 years and was the starting point of the ancient Maritime Silk Road, the oldest and the only port of foreign trade in China that has never been closed and is known as the “Thousand-Year Commercial Capital”. The booming city is also well-known for its highly liveable environment, topping the people’s livelihood development index in China for two consecutive years, and it has been named an “International Garden City” by the United Nations.
Guangzhou’s strategic location within the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) also provides businesses with excellent connectivity to other major cities in the region, such as Hong Kong SAR, Macau SAR, Shenzhen, Foshan, Dongguan, etc. According to Guangzhou International (the official website of the Guangzhou government), the regional GDP of the city achieved 2.88 trillion RMB (428 billion USD) by the end of 2022. The outstanding growth of the manufacturing industry and leasing and business services industry achieved YoY 83.6 percent and 87.2 percent respectively.
According to Guangzhou International, in 2022, the city’s utilization of foreign capital was 57.41 billion RMB (8.5 billion USD), a yearly increase of 5.7%. A total of 335 of the Global 500 companies invested in Guangzhou, with a total of 1,658 projects.
China Import and Export Fair, also known as the Canton Fair, was established in 1957 in Guangzhou, China, since then it has been held almost every spring and autumn, and established trade relations with more than 229 countries and regions around the world. As a comprehensive international trading event with the longest history, as well as a wide exhibit variety, quite a large scale and buyer attendance, and the most diverse buyer source country, the Canton Fair has the greatest business turnover and a well-known reputation in China. Since its inception 67 years ago, the accumulated export volume has amounted to about USD 1.5 trillion and the total number of overseas buyers attending the Canton Fair onsite and online has reached 10 million.
Key notes of the Nansha Plan
On 6 June 2022, the State Council of China released the Master Plan for Guangzhou Nansha, titled “Deepening Comprehensive Cooperation between Guangdong, Hong Kong, and Macao with a Global Perspective,” commonly referred to as the Nansha Plan. It is considered a comprehensive strategy aimed at enhancing regional cooperation, technological and industrial advancement, talent cultivation, and international competitiveness.
The Nansha Plan is designed with several key objectives:
Strategic Development and Cooperation Among Guangdong, Hong Kong, and Macao: The Nansha Plan aims to accelerate comprehensive cooperation among Guangdong, Hong Kong, and Macao, positioning Nansha as a major strategic platform for the Greater Bay Area. By 2025, the plan envisions an improved joint technological innovation system, deepened industrial cooperation, and the initial formation of a regional innovation and industrial transformation system. Additionally, the plan foresees an enhanced living and working environment for Hong Kong and Macao youths, with a focus on attracting and retaining young talent through quality public resources in education and healthcare.
Boosting Technological Innovation and Industrial Cooperation: The plan emphasizes strengthening technological innovation through joint projects and key technology development among institutions in Guangdong, Hong Kong, and Macao. It includes initiatives for enhancing basic research, application development, and commercialization, with an emphasis on intellectual property services and innovation in technology cooperation mechanisms. The goal is to transform South China into a leading hub for technology transfer and transformation, particularly in areas like electronic engineering, computer science, marine science, AI, and smart cities.
Cultivation of High-Tech Industries and International Talent Attraction: The plan targets the development of intelligent manufacturing, smart cities, and high-tech industries like robotics, unmanned systems, and digital industries. It also focuses on attracting international high-end talent through innovative policies, providing incentives for international talents and Hong Kong and Macao residents to work in Nansha. This involves enhancing education and training, improving employment opportunities, and creating a more internationalized and business-friendly environment.
Facilitating Youth Entrepreneurship and International Collaboration: Nansha Plan is dedicated to fostering youth entrepreneurship and employment, especially for Hong Kong and Macao youths, by optimizing platforms like innovation workshops and cultural creative communities. The plan includes measures to offer practical support to entrepreneurial teams, facilitate internship and employment opportunities, and strengthen cultural exchanges among young people. This approach aims to stimulate creativity and innovation, contributing to a vibrant entrepreneurial ecosystem and enhancing the region’s attractiveness as a destination for young entrepreneurs and professionals.
Preferential Policies in the Nansha Cooperation Zone
The Cooperation Zones in Nansha of Guangzhou, Qianhai of Shenzhen, and Hengqin of Zhuhai in GBA implement a series of preferential policies to attract businesses, industries, and talents from Hong Kong SAR, Macau SAR, and overseas countries and regions. These incentives play a pivotal role in stimulating economic growth within the zones.
For overseas high-end and urgent-needed talents working in the nine GBA cities in Guangdong, the local government shall grant subsidies to the part of the individual income tax (IIT) paid by them that exceeds the amount of tax calculated on the basis of 15% of their taxable income. For residents from Hong Kong SAR, the part of their individual income tax (IIT) burden that exceeds the Hong Kong SAR tax burden shall be exempted; for residents from Macau SAR, the part of their IIT burden that exceeds the Macau SAR tax burden shall be exempted. This strategic approach serves to entice and retain overseas talents in Nansha, thereby fostering a talented workforce.
For overseas enterprises (excluding real estate industry and financial industry) in Nansha Development Zone, there are special initiatives to promote their business. Based on the current policy, for the newly set up FIE, remaining enterprises and Multinational headquarters, it may enjoy a subsidy equal to at most 1.5 percent of the actual used amount of foreign capital in that year. In addition, Nansha also provides land rental subsidies for industrial enterprises, financial support for technological innovation, and rewards for attracting high-quality projects and skilled personnel.
Furthermore, the Nansha preferential catalogue includes 140 items in eight categories, and makes favoured enterprises operating in advanced manufacturing, high-tech industries, IT, bio-pharmaceutical, shipping and logistic, modern services and finance can avail themselves of corporate income tax (CIT) incentives with 15% tax rate. Besides, high and new tech enterprises (HNTEs) and technology-based small- and medium-sized enterprises (TSMEs) are allowed to extend their loss carry-over period to 13 years, and this preferential policy is the leading one in China.
Criteria for TSMEs (Technology-based Small- and Medium-sized Enterprises)
Employees ≤ 500, annual sales revenue ≤ RMB 200 million and total assets ≤ RMB 200 million; Requirement for their product and service; Requirement on the enterprise credit; Requirement on the certification or prize, etc.
Criteria for HNTEs (High and New Technology Enterprises)
Requirement on the founding time of the enterprises; the percentage of total R&D expenses from total sales revenue for the same period in three fiscal years; the percentage of total R&D expenses incurred in China from total R&D expenses of the enterprises in three fiscal years; the percentage of revenue from high-tech products (services) from the enterprise’s total revenue for the same period in three fiscal years; enterprise credit; evaluation of innovative capacity.
Such measures aim to bolster the development of the overseas enterprises in Nansha and enhance their competitive edge, and cultivate a propitious business environment and facilitate investment in the district.
Successful Foreign-Invested Enterprises (FIE) in Nansha Cooperation Zone
The Nansha Cooperation Zone seeks to create a favourable business environment by offering preferential policies and incentives to both domestic and international businesses. Therefore, Nansha has attracted a diverse range of successful FIE, many of which are SMEs in various industries.
In the field of advanced manufacturing, a new energy automobile industrial cluster has emerged, including prominent automobile manufacturers like GAC Toyota, and automotive parts suppliers such as Util from Italy, Advics from Japan, and the technologies developed by companies such as tunnelling technology developed by Herrenknecht from Germany have gained international recognition, while Longxue Island has become one of China’s major shipbuilding bases.
Successful stories of foreign invested enterprises:
- Util: Founded in 1959 in Italy, UTIL is an international company for the production of parts for brake systems for the automotive sector, earning a significant share of the global market. Util (Guangzhou) Auto Parts Co. Ltd, which features a 10,000 m² plant in the Nansha district, provides cutting-edge technology and efficient manufacturing processes to serve Asian markets, with a special emphasis on the automotive sector.
- Advics: Founded in 2001 in Japan, Advics focus on the manufacturing and sale of automotive brake components, e.g. Electronic Stability Control, Anti-lock Brake System, Brake booster, Master cylinder, Disc brake, Drum brake and other related components. Their Guangzhou factory is located in Huangge Auto Parts Industrial Park in Nansha District and provides Toyota with high-quality automobile brake system.
- Herrenknecht: Found in 1977 in Germany, Herrenknecht offer the complete product portfolio in mechanized tunnelling technology worldwide. The construction of tunnels for the metro and the road in many Chinese cities was equipped with Herrenknecht technology and machines such as Tunnel Boring Machine(TBM).Herrenknecht owned two companies in Guangzhou, including one joint venture (JV) in the Nansha Cooperation Zone and one wholly foreign-owned enterprise (WOFE) in the bonded area of Huangpu District.
- Octogone: Founded in Singapore, Octogone provides fresh seafood worldwide. In 2018, Octogone became one of the largest suppliers of basa catfish in China. They have been expanding their Chinese market and have newly established an import and export subsidiary in Nansha for their global business.
With the establishment of the Cooperation Zone, Nansha has also seen significant growth in emerging industries, with over 600 AI and biotech enterprises and high-valued projects, including the platform cooperated among the local government of Nansha, Microsoft Azure, and the local Company Xiangjiang Technology for enterprises in Nansha to accelerate their innovation and digitalization, and Nansha factory of Lonza from Switzerland for small molecules CDMO and raw materials production for health.
Related to the shipping and agriculture industry in Nansha Cooperation Zone, Louis Dreyfus Company (LDC), a global agricultural product processing and trade enterprise, is in the process of constructing a comprehensive grain logistics industrial park with an annual capacity of 3 million tonnes, relying on the powerful loading and unloading and warehousing capacity of Nansha Grain Terminal and the help of preferential policies, and focusing on building a distribution centre for grain and oil in South China, which will ensure a secure supply of agricultural products in the region. The company aims to leverage Nansha’s growth and become rooted in the region’s development.
How CW can help
Nansha’s successful integration of foreign and domestic investments are facilitated by attractive policies and incentives in the Nansha Cooperation Zone. CW CPA can play a crucial role for companies looking to leverage the opportunities offered by the Nansha Plan. With our expertise in financial management and business strategy, CW CPA’s advisory services can support companies in identifying investment opportunities, managing risks, and formulating strategies to tap into Nansha’s growing market and technological landscape, effectively bridging the gap between potential investors and the unique advantages of the Nansha Plan.
Contact us today for a consultation.