+852 2956 3798

cw@cwhkcpa.com

Guangdong-Macao In-depth Cooperation Zone in Hengqin, Zhuhai

The development of the Guangdong–Macao In-Depth Cooperation Zone (“Cooperation Zone”) in Hengqin is part of the regional development plan for the Greater Bay Area of China.  Hengqin Island, the largest island of Zhuhai situated next to Macao, has been a significant area of focus for development. The Cooperation Zone in Hengqin aims to support the development of Zhuhai and overcome its limitations in terms of city growth and economic diversification. 

In this article, we explore Zhuhai’s economic potential and highlight the advantageous industries and preferential tax policies in the Cooperation Zone in Hengqin.

Table of Contents

Explore Zhuhai in Guangdong
Overview of Zhuhai

Zhuhai is in the southwest Pearl River estuary in Guangdong Province, with Hong Kong across the bay in the east and Macao adjacent in the south and nearby east. Zhuhai was designated as one of China’s first group of special economic zones, given its proximity to Macao, a mix of Western and Eastern cultures, and its notable history of outstanding scholars and leaders. It’s the second largest port city (behind Shenzhen) in China and has 10 national Category-1 ports and it is a key point of the 21st-Century Maritime Silk Road.

Economic Development

Zhuhai posted outstanding results in economic development and grew a regional gross domestic product (GDP) by 2.3% (0.4% above the provincial average) to CNY 404.55 billion  (USD 59.89 billion) in 2022, the added value of Zhuhai’s industries above designated size grew up by 6.9% to achieve CNY 148.08 billion (USD 21.92 billion), topping Guangdong province in terms of growth rate. From January to April 2023, the city attracted USD 790 million in actual foreign direct investment (FDI), up 10.2% year-on-year, and 552 new foreign-invested enterprises (FIE) were established, up 0.4% year-on-year. Zhuhai’s total industrial investment volume is expected to reach over CNY 100 billion (USD 15 billion) in 2023, with the city accelerating the construction of its industry 5.0 space projects, which cover an area of 20 million square meters (4,942 acres).

Living Environment

As one of China’s first special economic zones, Zhuhai has continuously prioritized ecological development, enjoying one of the best environments in China. The city is rated as one of the most livable, appealing, and business-friendly cities in the Guangdong-Hong Kong-Macao Greater Bay Area. And it was the first Chinese city to receive the UN International Award for Most Improved Living Environment in 1998.

Industries for Foreign Direct Investment (FDI)

Basic industries in Zhuhai are precision machinery, electronic information, appliances, petrochemicals, energy, medicine, and distinctive industries such as printing consumables and yacht manufacture. A number of SMEs and enterprise groups such as Bühler, a German company for motor manufacturing, and Hettich for furniture hardware manufacturing, have their factories or subsidiaries in Zhuhai. More than 50 Fortune Global 500 companies have investment projects in Zhuhai, including BP, SINOPEC, CNOOC and Shell in the chemical energy industry, Bosch, Canon, Flextronics, Philips, and AVIC in the manufacturing industry.

Key notes of Hengqin of Zhuhai- “The Overall Plan for the Construction of the Guangdong-Macao In-depth Cooperation Zone in Hengqin” (officially announced on 2021-09-05)
  • To cooperate with Macao to build a world tourism and leisure center;
  • To support the joint development of Hengqin with Bonded Area and Hongwan Area in Zhuhai, and develop a Guangdong-Hong Kong-Macao Logistics Park;
  • To accelerate the construction of major cooperation projects such as the Hengqin-Macao Youth Entrepreneurship Valley and the Traditional Chinese Medicine Science and Technology Industrial Park, and prepare for the construction of the Guangdong-Macao Information Port;
  • To support the development of the Traditional Chinese Medicine Science and Technology Industrial Park, and explore solutions for qualified medical workers from Hong Kong, Macao and foreign countries to practice directly in Hengqin;
  • To support Hengqin and Macao in jointly building a China-Latin America economic and trade cooperation platform, build international trade channels between mainland China and countries and regions related to the Belt and Road Initiative, and promote innovation in service trade models such as cross-border delivery, overseas consumption, movement of natural persons and commercial presence;
  • To support Hengqin in providing support for the development of cross-border e-commerce and facilitate the access of products from Portuguese-speaking countries to the market of mainland China through Macao;
  • To research delegating Hengqin the authority to issue visas and residence permits for foreigners.
Advantageous Industries in the Cooperation Zone

According to the Statistic Bureau of Guangdong-Macao In-depth Cooperation Zone in Hengqin, from January to April 2023, the zone absorbed USD 670 million in actual foreign direct investment (FDI), a year-on-year significant increase of 247.5%, and more than 55,000 domestic or international enterprises were in the zone. Sci-tech R&D, high-end manufacturing, brand industries like culture, tourism, conventions, and exhibitions, as well as modern finance industries in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin have experienced high-quality development since the zone’s establishment in September 2021.

Sci-tech R&D and high-end manufacturing

Currently, more than 10,000 technology-based enterprises such as Elantas, Najin Technology, Digifluidic, Amicro are in the cooperative zone. The zone is where a domestically developed chip with record-breaking worldwide computing power was invented, and where a silver nanoparticle material with a diameter of about one-tenth of a thousandth of a human hair was developed. The zone actively promotes the fields of biomedicine, integrated circuits (IC), electronic components (EC), new materials, new energy, big data, artificial intelligence (AI), and the Internet of Things (IoT). The development of a microelectronics industry chain with distinctive chip design, testing, and inspection is speeding up. A next-generation Internet industrial cluster, IPv6 and 5G application demonstration projects, with collaborative innovation environment in AI are under construction.

Healthcare and Biomedical Industry 

The biopharmaceutical enterprises in the cooperation zone such as United LaboratoriesiCarbonX mainly focus on cell therapy and R&D, tumour liquid biopsy, peptide drugs, nucleic acid drugs, etc. Some of the new drugs developed by the enterprises in the zone have applied for double applications of China and the US, and are in the national leading role in R&D in specific segments of the track. Regarding infrastructure construction, a pharmaceutical innovation R&D and transformation platform with independent intellectual property rights is in construction in the zone.

Culture, tourism, exhibition, and trade

Tourism-related sectors including leisure and recreation, conference and exhibition, sporting events, sightseeing, and comprehensive healthcare industries like leisure and recreation and rehabilitation medicine, are rapidly developing in the zone. The construction of tourism resources of islands nearby is enhanced to promote independent yacht travel in Guangdong, Hong Kong SAR and Macao SAR. The China-Portuguese-speaking Countries international trade center and an international hub port for digital trade are under construction to promote the digitalisation of traditional trade. The revenue of the Culture, sports and entertainment industries jumped 9.9 times from its year-ago level.

Modern finance

In 2022, the added value of the financial industry in the zone reached 16.4 billion yuan, which accounts for 35.5% of the GDP of the zone. The financial service between China and Portuguese-speaking countries in the cooperation zone is supported by the Portuguese-speaking Countries’ Financial Service Platforms. Foreign capital is attracted by the “Hengqin Finance Article 30” which indicates the direction of financial development in the Zone, and more and more foreign financial institutions choose to set up branches in the Zone.

Preferential tax policies in the Cooperation Zone

Qualified industrial enterprises and high-end and urgently needed talents are able to separately enjoy a preferential CIT rate and IIT rate at 15 percent in the Guangdong-Macao In-depth Cooperation Zone.

The Guangdong-Macao In-depth Cooperation Zone in Hengqin is fast developing due to efforts made by Hengqin taxation departments in reducing tax burdens for enterprises with a package of preferential policies, such as tax policies for corporate income tax (CIT), individual income tax (IIT), import tax, and tariffs in the cooperation zone. For example, instead of the general CIT rate of 25%, a preferential CIT rate of 15% is provided for enterprises which are in encouraged industries. Furthermore, the latest policy lowers the minimum requirement as well as nearly doubled the coverage of the industry for enterprises benefiting from the preferential CIT rate of 15%. The requirement for the main business income ratio was reduced from 70% to 60%, the catalogue of the preferential CIT in the Zone covers 150 items in 9 categories, most of which include the advantageous industries as described above, thus enabling more enterprises in the zone to obtain the policy benefits.

According to the official website of the cooperation zone in Hengqin, more than 70% of Hengqin enterprises are now eligible for the preferential policy on the full refund of value-added tax (VAT) allowance, while more support has gone to innovation and entrepreneurship, with CNY 2.5 billion (USD 359 million) of CIT deducted for those carrying out R&D.

As for preferential personal tax policies for domestic and overseas high-end talent, who engage in the industries listed in the Encouraged Industry Catalogue in the cooperation zone, their portion of IIT exceeding 15% will be exempted. Macao residents working in the zone will also be exempted from the portion of their IIT burden exceeding Macao standards, which means the tax burden of Macao residents in Hengqin has been reduced by 70 % to a similar level to those in Macao.

However, the domestic or overseas enterprises or talents that want to apply for the tax deduction, need to fit several requirements, such as the requirements for enterprises of the industry, the main business income, staff number and ensure the enterprises are actually operating in the zone, and the requirements for talents of social insurance, labour contract, and the living days in the zone.