05 July 2012
The Chinese government has decided to set up a special economic zone at Qianhai, in Shenzhen, in order to promote greater cooperation with Hong Kong?s service sector, and, in particular, use of the latter?s offshore renminbi funds.
It has been said that the new zone, construction of which will begin in 2013 and is expected to take eight years, should become a testing ground for products to open up further China?s capital market and enhance RMB international convertibility.
For example, while it has previously been possible to lend to Chinese companies from Hong Kong, Qianhai should become the first opportunity for Hong Kong?s financial institutions to lend to Chinese companies from an operation on the Chinese Mainland. For that purpose, under the Mainland and Hong Kong Closer Economic Partnership Arrangement, access restrictions will be lowered for those institutions to set up in the new zone.
Within the wider service sector, the Chinese government is also looking for Hong Kong businesses to invest in telecommunications, hospitals and schools in Qianhai, and for Hong Kong?s lawyers and accountants to be able to establish practices in the zone.
In addition, companies established in Qianhai in the sectors approved by the government, including financial and legal firms, will be given a preferential 15% corporate income tax rate to encourage their development.
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