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Investing in Inland China

Updated:2017-8-11 16:04:08    Source:www.tannet-group.comViews:313

Rising minimum wages have led commentators to declare the end of affordable Chinese labor. However, these assertions ignore the vast expanse of the Chinese mainland, and the varying economies that exist within it. The sprawling city of Chongqing especially stands out as a major emerging manufacturing destination for foreign investors.

Over the past years, manufacturing in China has steadily crept inland as companies seek not only to lower their costs, but also to take advantage of government incentive programs aimed at developing western provinces. In particular, the State Council enacted the “China Western Development Plan” in 2000, which prioritized increasing foreign direct investment (FDI) into Central and Western China.

The introduction of preferential development policies has seen Chongqing – long a strategic hub in the country’s west – become one of China’s most important cities. Chongqing has achieved the highest regional GDP growth in China for three years running, growing at 10.9 percent in 2014, 11 percent in 2015, and 10.7 percent in 2017. As FDI in Western China continues to evolve, Chongqing will become an even more important city.

Preferential policies are often offered through industrial parks that seek to develop certain industries. In order to assist foreign investors better assess their investment opportunities in Chongqing, this article explores three key industrial zones and their preferential policies for foreign businesses.

Chongqing: Western China’s manufacturing hub
The Chongqing government actively promotes the electronic information and electronic manufacturing industry, as well as other emerging industries like high-end equipment manufacturing, chemical medicine, new materials manufacturing, and new energy industry. In 2015, electronic manufacturing was the third fastest growing industry by profit in Chongqing, after automobile manufacturing and retail/commercial.

With the rapid growth in electronic and high-tech manufacturing, many leading multinational enterprises, including Hewlett-Packard, Foxconn, Inventec, Acer, IBM, Honeywell, CISCO, and HP are setting up their businesses in Chongqing. In June 2017, Ford made headlines when it announced that it would base its new production center in Chongqing Liangjiang New Area instead of Mexico, the originally planned destination.

Chongqing’s preferential policies are one of the most appealing factors for foreign investors. In early 2017, the State Council released a guideline, Circular on Several Measures on Expanding the Opening to and Active Use of Foreign Investment (the Circular), outlining how the central government seeks to increase FDI into Central and Western provinces. The Circular grants local governments in these regions greater autonomy to offer local incentives and adopt local preferential policies.

Generally, Chongqing’s preferential policies include tax incentives, land and real estate benefits, foreign exchange management and credit, import and export assistance, and visa advantages. However, investors should note that preferential policies vary in different development zones even within the same province.

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