1. China’s central government has offered tax incentives, greater autonomy in local legislation and more administrative power to liberalise the capital markets in Shanghai, as Beijing envisions building Pudong into a “brilliant pearl” of a strong socialist country.
2. The document is being seen by city officials and the business community as a grand blueprint for Shanghai’s development until 2050.
3. Key companies in semiconductors, artificial intelligence, biotechnology and civil aviation will enjoy a cut in corporate income tax rates as Beijing hopes to grasp core technologies in these industries that are viewed as vitally important to the country’s growth prospects.
4. These firms will enjoy a corporate income tax of 15 per cent, nearly halved from a universal rate of 25 per cent, in the first five years after business registration, according to the guideline.
5. Pudong covers more than 1,200 square kilometres, about a fifth of mainland China’s commercial and financial capital. Its population of 5.7 million also represents about a fifth of Shanghai’s total.
6. Mainland China’s commercial and financial capital was looking to better use existing preferential policies – lower corporate income tax, duty-free customs zones and flexible land distribution – to unlock Lingang’s potential and attract top companies from home and abroad.
7. In June, the National People’s Congress, China’s top legislature, authorised Shanghai to draw up local rules that might not comply with national laws and regulations, a move to grant Shanghai greater freedom in conducting reforms.
8. The guideline released on Thursday reaffirmed that Shanghai would have autonomy in making local rules to conduct drastic liberalisation. It also said the local stock and futures exchanges would be encouraged to deregulate markets to launch more derivatives and bring in market makers.
9. Pudong will also be the pilot zone to explore the possibility of making the yuan fully convertibility, the document added.
SHANGHAI LINGANG
1. The Lingang Special Area of China (Shanghai) Pilot Free Trade Zone (FTZ), located in the southeastern part of Shanghai's Pudong New Area, aims to build world-class industrial clusters in integrated circuits (ICs), biomedicine, artificial intelligence (AI), new-energy vehicles (NEVs), and focus on new patterns of international trade and shipping.
2. The announcement follows the country's move to release guidelines in July to support Pudong's high-level reform and opening-up and make it a pioneer area for socialist modernization.
3. Home to Tesla's Gigafactory Shanghai, Lingang has taken the lead in making breakthroughs in multiple key sectors. Since the area was launched in August 2019, it has been a major strategic decision made by the country to show its clear stand to adhere to all-round opening up.
4. The number of key industrial projects in the area has reached 290, with a total investment of about 350 billion yuan ($53.9 billion), of which more than 200 billion yuan has been invested in three major fields - integrated circuits, biomedicine and AI
5. A large number of projects in the aerospace, new-energy vehicles, high-end equipment and other cutting-edge industrial areas have been launched.
SUPPORTIVE POLICIES - TAX INCENTIVES
1. Meanwhile, a total of four batches of 106 enterprises have been listed to receive supportive policies such as tax exemptions. The amount of tax exemptions handed out to the first three batches of firms exceeded 270 million yuan, which could be one of the important factors in attracting more investment.
2. Shanghai unveiled a guideline on Wednesday including 40 specific measures to further support Lingang's high-level opening up. Along with building industrial clusters, it also called for improving the area's talents mechanism to better attract talents from both home and abroad.
3. Lingang's industrial output is expected to hit 356.9 billion yuan since it was launched in August 2019, with the average growth rate hitting 53.9 percent, Zhu Zhisong, director of Lingang Special Area Administrative Committee said during a press conference on Wednesday. A total of 756 agreements were signed in the past two years, involving investment up to 447.8 billion yuan, according to Zhu.
4. It has provided many manufacturing industry success stories such as Tesla's Gigafactory in Shanghai, which has attracted over 50 billion yuan of investment. China's first wholly foreign-owned Fintech company - HSBC Fintech Services (Shanghai) Co - was also set up in Lingang in September 2020, as a way to further push forward financial opening-up and innovation in China.
OTHER SUPPORTIVE POLICIES
1. Part of the area’s effort to attract foreign investment to set up various institutions, the measures also support foreign investors to set up securities companies, fund management companies and futures companies in Lingang that are controlled or wholly owned by foreign investors.
2. The establishment of foreign-owned or controlled life insurance companies in Lingang will also gain support from the government. Overseas financial institutions are encouraged to invest in or establish pension management companies in the area.
3. Multinational companies are encouraged to set up global or regional capital management centers and other headquarters in the area, and participate in inter-bank foreign exchange market transactions upon approval, so as to make the area a cross-border capital flow and allocation center in the Asia Pacific region.
4. At the same time, overseas investment institutions are granted to launch and set up private funds in Lingang amid a test run of qualified foreign limited partnership and qualified domestic limited partnership.
5. On the other hand, institutional building is a must-have of the area. Hence, Lingang will establish the rule of law in its financial sector, promote the establishment of international commercial arbitration organizations, accelerate the agglomeration of international arbitration institutions, and create a diversified dispute resolution mechanism that links mediation, arbitration and litigation and supports the development of professional institutions.
6. Lingang will also implement cross-border financial taxation rules with international competitiveness, expand the scope of application of value-added tax for service exports, and study new taxation rules that adapt to the development of overseas investment and offshore business.
7. The area will also implement safe and orderly cross-border flow of Internet data, improve the cross-border flow of financial transaction data, and unblock channels for financial institutions to obtain overseas economic and financial information.
8. Lingang will also implement a cross-border financial management system with convenient receipt and payment of capital, which will include the establishment of an integrated local and foreign currency account system and the implementation of a more convenient cross-border fund management system, a multifunctional free trade account and the free inflow and outflow and free exchange of capital in the area.
9. The special account for foreign direct investment in yuan capital could be canceled in the future, upon the trial of cross-border capital pool integrating local and foreign currencies.
10. The encouragements also include support for domestic insurance institutions to cooperate with overseas institutions in the development of cross-border medical insurance products, the pilot of international medical insurance settlement, and access to international medical services.
Source:
https://www.globaltimes.cn/page/202108/1231856.shtml
https://24htech.asia/china-grants-tax-breaks-policy-leeway-to-turn-shanghai-into-powerhouse-for-ai-chips-planes-and-pharmaceuticals.html
https://www.shine.cn/biz/finance/2005087741/
