At the forefront of innovative development, Shenzhen has captured the interest of foreign investors around the world. The national city of innovation has continuously reinvented itself, embracing its distinctive role that extends beyond being a technological pioneer. Shenzhen has been in the vanguard of China’s economic reform and opening-up. For other cities in China, it has been a touchstone of economic success. From its humble beginnings as a small fishing village, Shenzhen, situated in the southern region of the prosperous Guangdong province, has evolved into a burgeoning international tech hub. Its awe-inspiring development has propelled “China’s Silicon Valley” into the ranks of megacities worldwide.
At the start of August 2023, the Shenzhen Municipal Government issued three documents, each containing a clutch of measures, to comprehensively optimise the city’s business environment and facilitate foreign investment. Recognising Shenzhen’s pivotal role as a “core engine” in spearheading the development of the Guangdong–Hong Kong–Macao Greater Bay Area (“GBA”), the documents call for the hi-tech powerhouse to take the lead in promoting further regional integration.
As the epicentre of all things tech and one of the GBA’s core cities, Shenzhen is poised to become an even more attractive destination for investors. This article will delve into how the newly implemented set of measures can enable foreign businesses to operate and invest in Shenzhen and the GBA with greater ease.
Table of Contents
Overview of development plans
On 5 August 2023, the Shenzhen Municipal Government issued three development plans aimed at expediting trade and investment liberalisation as well as boosting Shenzhen’s international competitiveness. The three Working Plans are as follows:
- The Working Plan for Optimising the Market-oriented Business Environment (2023-2025) outlines key focus areas for Shenzhen, including enhancing intellectual property rights protection, widening market access, promoting fairer competition, and improving government services for enterprises. Some of the measures detailed in the document include streamlining enterprise registration and deregistration services to increase efficiency, and setting up a one-stop system for handling bankruptcy-related matters. To create a level-playing field for all types of enterprises, the fair competition review mechanism will be refined, along with the introduction of a fair competition index in 2025.
- The Working Plan for Optimising the Business Environment under the Rule of Law (2023-2025) centres on bolstering the legitimate rights and interests of all market players and promoting high-quality development rooted in the rule of law. By doing so, Shenzhen aims to accelerate the establishment of a model city that can serve as a shining example for other cities to follow. According to the document, “clean-ups” will be conducted in respect of laws, regulations, and policies that are incompatible with the promotion of the rule of law and a market-oriented and international business environment. In addition, Shenzhen will improve the accessibility of judicial services and the conflict and dispute resolution mechanism.
- The Working Plan for Optimising the International Business Environment (2023-2025) proposes that Shenzhen accelerate the process of easing rules, regulations, standards, and other requirements. These changes are expected to further advance the liberalisation of trade and investment in Shenzhen. As a result, Shenzhen’s role as a leading hub for international business activities will be further solidified. Plans will also be set in motion to modernise its service industry. By 2025, the city envisions the modern service industry’s added value to account for more than 77 per cent of the overall service industry’s added value.
Aligning with international rules
In a bid to enhance its appeal to foreign investors, Shenzhen aims to bridge the gap between international regulations and local rules. After assessing the relevance and applicability of international frameworks, Shenzhen intends to achieve convergence between international and local standards in a wide range of areas, including finance, transport, health, and medical care. This move demonstrates Shenzhen’s commitment to creating a business environment that prioritises transparency, stability, and predictability. These factors play a crucial role in instilling greater certainty and confidence among foreign investors. Drawing on international frameworks can help oil the wheels of global commerce and encourage more active participation in global supply chains.
In addition, Shenzhen is seeking to harmonise its trade regulations with international benchmarks, such as those set out in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”). The CPTPP is a landmark trade agreement signed by 12 countries – including Australia, Canada, Japan, Mexico, Singapore, and the United Kingdom – which came into force in 2018. Shenzhen’s alignment with the highly stringent trade rules under the CPTPP marks a significant milestone in China’s opening-up, as the country vies for accession to the trade pact.
Strengthening legal protection for businesses
- A business-friendly legal framework within the GBA
A well-functioning and robust legal system is an essential foundation for conducting business activities. It provides a stable environment that allows for the enforcement of contracts, safeguarding of property, resolution of disputes, and protection of rights. According to the Working Plans, Shenzhen is to take the lead in driving coordination efforts on the legal front. It is tasked with establishing a mechanism to facilitate the development of a business-friendly legal environment within the GBA. In addition, the city will take charge in accelerating the regulatory alignment between Shenzhen, Hong Kong, and Macao. Further, Shenzhen will play an important part in improving reciprocal recognition of cross-boundary mediation agreements and ensuring their effective implementation.
These new policy initiatives are consistent with ongoing endeavours to strengthen judicial cooperation and exchanges between Hong Kong and Shenzhen. The Outline Development Plan for the GBA released in February 2019 places emphasis on enhancing cooperation in legal matters between Hong Kong and Shenzhen, especially through the Shenzhen–Hong Kong Modern Service Industry Cooperation Zone in Qianhai (“Qianhai Cooperation Zone”).
Shenzhen’s coordinating role in facilitating the establishment of a business-friendly legal framework within the GBA holds great significance. Leveraging the respective strengths of the GBA’s core cities will enable Hong Kong to give full play to its role as an international legal and dispute resolution services centre. The position of Shenzhen’s neighbour as a leading jurisdiction for arbitration is almost uncontested. In a survey conducted in 2021, Hong Kong was ranked third worldwide after London and Singapore as one of the most preferred locations for arbitration. Its sophisticated arbitration system is very well placed to help international businesses operating in the GBA resolve their various commercial disputes.
- Safeguarding intellectual property rights
Improving intellectual property rights protection has been high on the Chinese government’s agenda in recent years. To better safeguard the interest of rights holders, Shenzhen will implement various measures to step up protection efforts. Specifically, the city will trial systems to expedite the handling of intellectual property disputes, patent re-examinations, and invalidation cases, as it strives to reduce the overall processing time for intellectual property cases. Emphasis will be placed on strengthening the protection of intellectual property rights in key industrial sectors and strategic areas.
Additionally, new avenues will be explored for the preliminary assessment of patent applications, thereby cutting the time required to obtain approval. Furthermore, Shenzhen will look into creating a joint response mechanism for investigating infringements. The purpose is to ramp up collaborative efforts with Hong Kong and Macao in enforcing intellectual property rights.
Shenzhen–Hong Kong Modern Service Industry Cooperation Zone in Qianhai
- “Manhattan of the Pearl River Delta”
The Working Plans also highlight the need for Shenzhen to forge tighter ties with Hong Kong. More importantly, Shenzhen should showcase the unique dynamics of the “Tale of Two Cities” of Shenzhen and Hong Kong to the world. Their synergistic partnership offers ample opportunities for investors. A prime illustration of their successful collaboration can be seen in the establishment of the Qianhai Cooperation Zone.
The Qianhai Cooperation Zone, often referred to as the “Manhattan of the Pearl River Delta”, is an innovative business zone situated in the southwestern area of Shenzhen. It aims to become a pioneering hub for modern service industries, including finance, logistics, information technology, and professional services. Ascribed a high level of importance by the Chinese government, the Qianhai Cooperation Zone has been designated a key “demonstration zone for Hong Kong/Guangdong modern service industry innovation and cooperation”. The Plan for Comprehensive Deepening Reform and Opening-up of the Qianhai Cooperation Zone promulgated in September 2021 envisages a higher level of cooperation between Shenzhen and Hong Kong. This strategic initiative positions the two cities as “dual engines” driving development in the GBA.
- The next destination for investors
Businesses operating in the Qianhai Cooperation Zone can enjoy preferential treatment in a wide range of areas, including concessionary tax rates, simplified customs clearance business registration procedures, and relaxed restrictions on foreign investment. The Working Plans introduce additional measures to further optimise the business environment in the Qianhai Cooperation Zone. To uphold the rules of fair competition and enhance market dynamics, a fair competition review system will be trialled, along with the formation of a special committee. These measures, set to take effect this year, aim to promote the adoption of fair competition policy reviews and market competition assessments. The forthcoming implementation of the Regulations on the Protection of Investors in the Qianhai Cooperation Zone will go a long way in safeguarding investors’ rights and interests. On a separate front, Shenzhen is to offer support to multinational enterprises in setting up treasury centres in the Qianhai Cooperation Zone. This will enable enterprises to streamline their financial operations, while also facilitating their overseas business activities.
Promoting cross-border e-commerce and trade
Shenzhen’s e-commerce industry is still brimming with potential. As China’s retail landscape continues to move towards a more complex omnichannel ecosystem, the city is poised to capitalise on the opportunities arising from this transformation. Earlier in March, Shenzhen announced an ambitious plan to establish itself as a global live-streaming e-commerce hub. It aims to surpass 300 billion yuan in e-commerce sales by 2025. The adoption of e-commerce as an industry model to drive growth and boost consumption has gained enormous traction, ever since its role in China’s economic development was highlighted in the 12th Five-Year Plan in 2011.
The Working Plans present a host of initiatives to shore up Shenzhen’s e-commerce sector. In particular, the city will build a cross-border e-commerce distribution centre and assist in the construction of warehouses in comprehensive bonded areas. To promote the expansion of the livestreaming e-commerce industry, Shenzhen will provide support in the delivery of multilingual livestream broadcasts across a broad range of categories.
In addition, Shenzhen aims to establish a more cohesive and user-friendly system that is conducive to cross-border trade. The city plans to enhance its existing single-window trade facilitation services to increase efficiency. This involves streamlining the various aspects and players involved in international trade, including ports, shipping agencies, customs clearance, the handling of foreign exchange transactions and tax rebates, and the settlement of import/export charges. These initiatives will contribute to the optimisation and upgrade of Shenzhen’s overall trade infrastructure, thereby consolidating its position as a global trade hub.
What CW can do for you
Do you want to capitalise on the abundant business opportunities in Shenzhen and successfully establish operations in the city?
At CW, we recognise the importance of a powerful debut in the Chinese market. More importantly, we understand that every business has its own distinct set of objectives. This is why we pay utmost attention to helping you devise a tailored market entry strategy that aligns with your unique needs from the very outset. With a strong foothold in Shenzhen and the GBA as well as over 30 years’ experience, our China Consulting team can provide you with a one-stop solution from entry, set-up to helping you build a solid foundation for long-term growth and success.
Contact us to find out how we can help.