Investing in Nansha District, Guangzhou: Economy, Trade, and Industry

Nansha District within the southern metropolis of Guangzhou is a key commerce and funding hub and an necessary transport hyperlink to Hong Kong and Macao. The district is having fun with a interval of fast growth and financial development and is looking for to draw extra funding in strategic and rising industries. We focus on the district’s economic system, industries, and competitiveness as a serious manufacturing and e-commerce base and supply an outline of the preferential insurance policies accessible to international buyers.

UPDATE: A diminished 15 % company earnings tax (CIT) price has been formally carried out for companies working in sure areas in Nansha District, as per a discover launched by the Ministry of Finance and State Tax Administration in late October. The diminished CIT price is obtainable for corporations that derive a minimal of 60 % of their annual enterprise earnings from certainly one of industries included in Nansha’s 2022 preferential CIT catalogue. See beneath for extra info. 

Nansha is a county-level district of the metropolis of Guangzhou in Guangdong province. Situated simply 38 nautical miles (70 kilometers) from Hong Kong and 41 nautical miles (76 kilometers) from Macao, Nansha holds a strategic place within the Guangdong-Hong Kong-Macao Higher Bay Space (GBA) as a significant transport hub linking the mainland with Hong Kong and Macao, and certainly one of Guangdong’s most important gateways to sea-based commerce.

The district can be dwelling to the Nansha New Space sub-zone of the Guangdong (China) Pilot Free Commerce Zone, first established in 2015. By way of years of regular growth, the realm has emerged as a number one hub for manufacturing, whereas fostering the creation of a broad vary of industries that construct upon its power as certainly one of Guangzhou’s key logistics and distribution facilities.

The district has thus additionally turn into a magnet for international buyers who search to capitalize on its favorable place as a springboard to the GBA and the broader Asia-Pacific.

On this article, we offer an outline of Nansha District’s financial and business growth and focus on the advantages of investing on this quickly rising area.

Financial system of Nansha District

Nansha District’s native GDP reached RMB 213.2 billion (US$30 billion) in 2021. This can be a pretty small proportion of Guangzhou’s general economic system, accounting for simply over 6 % of town’s complete GDP. Nevertheless, it was one of many Guangzhou districts with the quickest GDP development charges in 2021, recording a year-on-year enhance of 9.6 %, second solely to Zengcheng District.

The tertiary sector makes up the lion’s share of the district’s economic system, accounting for 55.2 % of GDP in 2021. The tertiary sector has additionally grown on the quickest price in 2021, up 10.7 % year-on-year from 2020, outpacing each the secondary and first sectors. The secondary sector continues to be a serious element of the district’s economic system, reaching a complete added worth of RMB 88.59 billion (US$12.4 billion), accounting for 41.6 % of the district’s complete GDP.

International commerce and funding in Nansha District

Regardless of Nansha’s comparatively small footprint on Guangzhou’s general GDP, the district punches above its weight in relation to international funding. The district’s precise use of international capital in 2021 reached US$1.5 billion, accounting for 18 % of town’s complete.

In the meantime, foreign-invested enterprises (FIEs) accounted for 63.9 % of the overall output worth of commercial enterprises above the designated measurement (these with an annual most important enterprise income of over RMB 20 million (US$2.8 million) in Nansha in 2021. The overall output worth of those corporations reached RMB 217.4 billion (US$30.5 billion), rising 17.8 % year-on-year.

In 2021, 283 new FIEs have been established within the district, a year-on-year enhance of 15.5 %. As well as, 26 funding initiatives by Forbes 500 corporations have been launched within the district, reaching a complete of 223 within the district, in addition to 13 initiatives with an output of over RMB 10 billion (US$1.4 billion).

Nansha is a vital commerce hub in Guangzhou and the broader GBA. The Port of Nansha, which is a part of the Guangzhou Port Group, is the fastest-growing port in South China, and its capability has been rising yearly since its opening in 2004. Additionally it is the one deep-water port on the western banks of the Pearl River estuary. In 2021 it dealt with round 24.47 million TEUs, 31.9 % of which was to North America.

Nansha’s complete worth of international commerce reached RMB 260 billion (US$36.3 billion) in 2021, rising 14.7 % year-on-year, its ninth consecutive 12 months of development. 2022 is about to be one other 12 months of robust development, with the worth of import and export items declared in Nansha reaching RMB 387.9 billion (US$54.2 billion), up 48.4 % from the identical interval in 2021.

Main industries in Nansha District

Nansha District is dwelling to a sizeable manufacturing business and is a serious producer of cars. Because of its location on the west financial institution of the Pearl River estuary, its economic system can be closely reliant on commerce and associated industries, comparable to e-commerce, logistics, and trendy companies.

Car manufacturing

Auto manufacturing is the only largest manufacturing sector in Nansha, accounting for 45.5 % of all industrial sectors in 2021. The district’s car manufacturing capability exceeded 800,000 models yearly in 2021. That 12 months, the overall output worth of the auto manufacturing business reached RMB 154.9 billion (US$21.7 billion), a year-on-year enhance of 16.5 %.

The one largest industrial firm by each output worth and gross sales quantity amongst all industrial corporations in 2021 was GAC Toyota, a three way partnership between Toyota and the Chinese language GAC Group. The corporate, which is headquartered in Guangzhou and has its most important manufacturing base in Nansha District, produced 823,300 automobiles in 2021, regardless of the impression of the worldwide chip scarcity.

E-commerce

Nansha District, and the Nansha terminal of the Port of Guangzhou, is a serious port for cross-border e-commerce. (CBEC). In 2021, CBEC reached RMB 36 billion (US$5 billion), rising 70 % from 2020. Within the first eight months of 2022, the import and export of CBEC in Nansha reached RMB 23.99 billion (US$3.4 billion), a year-on-year enhance of about 15.6 %.

One of many district’s most important areas for the event of CBEC is the Guangzhou Nansha Complete Bonded Zone, which recorded 130 million import and export CBEC commodities within the first six months of 2022.

There are over 600 registered CBEC companies in Nansha. A number of main Chinese language e-commerce platforms have established distribution facilities in Nansha, comparable to Tmall, Kaola.com, and Vipshop. A number of international manufacturers have additionally established operations for CBEC within the district, together with Mead Johnson China, Danone, and Swisse.

Trendy companies

The added worth of recent companies in Nansha district reached RMB 87.1 billion (US$12.2 billion) in 2021, accounting for 40.9 % of the district’s complete GDP and 74.1 % of the worth add of the tertiary sector.

The annual working earnings of recent service corporations above designated measurement (these with an annual most important enterprise earnings of over RMB 20 million (US$2.8 million) reached RMB 124.8 billion (US$17.4 billion) in 2021, a year-on-year development price of 36.7 %. Amongst these, the working earnings of Web, software program, and knowledge expertise companies grew 40.6 % year-on-year, leasing and enterprise companies grew 11.9 % year-on-year, scientific R&D and expertise companies grew 16.1 % year-on-year, and tradition, sports activities, and leisure grew 13.7 % year-on-year.

Improvement of Nansha District

On June 14, 2022, the State Council launched a brand new plan for the event of Nansha District, titled the General plan for deepening the great cooperation between Guangdong, Hong Kong and Macao going through the world in Nansha, Guangzhou (the “Nansha Plan”), which outlines key insurance policies and measures for growing the district and deepening cooperation with Hong Kong and Macao.

The Nansha Plan units out a broad vary of growth targets, together with:

• Constructing a scientific and technological innovation business cooperation base
• Making a youth entrepreneurship and employment cooperation platform
• Selling the consolidation of worldwide high-end expertise
• Cultivating and growing high-tech industries
• Strengthening worldwide financial cooperation

To assist meet these targets, Nansha District will likely be supplied with an annual enhance of RMB 10 billion (US$1.4 billion) in its native debt restrict within the time interval from 2022 to 2024, which will likely be included within the steadiness of the native authorities’s debt. Elevating the debt restrict for the native authorities will enable it to concern extra special-purpose bonds, one of many most important instruments native governments use to fund initiatives inside their jurisdiction.

Key growth zones in Nansha District

Nansha New Space portion of the Guangdong (China) Pilot Free Commerce Zone

The Nansha New Space portion of the Guangdong (China) Pilot Free Commerce Zone (FTZ) (“Nansha New Space”) is likely one of the three most important areas of the Guangdong Pilot FTZ, together with the Hengqin Cooperation Zone in Zhuhai, and the Qianhai Cooperation Zone in Shenzhen. The Nansha New Space covers a complete of 60 sq. kilometers and is split into seven sub-areas which might be separated into the port space, central space, and Qingsheng space (Qingsheng being a village in Nansha).

Launched in 2015, the realm is designed to advertise free commerce between Guangdong, Hong Kong, and Macao, and can be dwelling to vary of established industries, comparable to transport and logistics, worldwide commerce, high-end manufacturing (together with car manufacturing, shipbuilding, and tools manufacturing), and expertise innovation (together with 3D printing, fintech, and clever manufacturing).

Guangzhou Nansha Complete Bonded Zone

The 4.99 sq. kilometer Guangzhou Nansha Complete Bonded Zone (“Nansha Bonded Zone”) is the district’s most important hub for distribution, international commerce, and CBEC. As such, the zone has a substantial bonded warehousing and companies business and is dwelling to a few of China’s three largest bonded drug distribution facilities.

Within the first six months of 2022, the overall worth of the zone’s imports and exports exceeded RMB 50 billion (US$7 billion), whereas the overall worth of imports and exports of the Nansha Worldwide Distribution Heart reached virtually RMB 20 billion (US$2.8 billion).

Preferential insurance policies in Nansha District

Preferential CIT insurance policies

In late October 2022, the Ministry of Finance (MOF) and State Tax Administration (STA) launched the Discover on Preferential Company Earnings Tax Insurance policies in Nansha, Guangzhou (the “Discover”), which gives particulars on the implementation of a diminished 15 % company earnings tax (CIT) price for corporations working in inspired industries positioned in sure areas of Nansha District. The usual CIT price in China is 25 %. 

The Discover was launched to implement the diminished 15 % CIT price launched within the Nansha Plan in three “preliminary launch areas”.  

As acknowledged in each the Nansha Plan and within the Discover, the preliminary launch areas are the Nansha Bay space of the Guangdong Pilot FTZ, the Qingsheng Hub Cluster, and the Nansha Hub Cluster, which collectively cowl a complete of 23 sq. kilometers. 

A diminished 15 % CIT price has already been carried out in a variety of different growth zones in China, together with the Lingang New Space in Shanghai and the Hengqin and Qianhai parts of the Guangdong Pilot FTZ. Usually, every of those areas will compile its personal checklist of inspired industries which might be eligible for the diminished CIT price, in addition to particular required scope and parameters for being thought-about as a participant in that business. 

To be eligible for the diminished CIT price, an organization’s most important enterprise should be in one of many industries listed within the Nansha Guangzhou Preferential Company Earnings Tax Catalogue (2022 Version) (the “Catalogue”), and derive a minimal of 60 % of their most important enterprise earnings from this business. The overall earnings should be calculated in accordance with Article 6 of the Company Earnings Tax Legislation of the Folks’s Republic of China.

Corporations should even have a “substantial operation” in one of many three preliminary launch areas in Nansha to be eligible. A “substantial operation” implies that the really managed entity of the corporate is positioned in one of many preliminary launch areas of Nansha District and that the corporate implements substantial and complete administration and management over manufacturing and operations, staffing, accounting, and belongings. 

For enterprises whose head workplace is positioned within the preliminary launch areas of Nansha, the 15 % CIT price is just relevant to the earnings garnered by the pinnacle workplace and department workplaces established within the preliminary launch areas in Nansha that meet the above necessities. For corporations with head workplaces positioned outdoors of Nansha, the 15 % CIT price is just relevant to the earnings derived from department workplaces established within the preliminary launch areas in Nansha that meet the above necessities. 

The Catalogue of industries eligible for the preferential CIT price covers 140 business classes throughout eight broad sectors. These are: 

1. Key high-tech industries, comparable to AI and built-in circuits, high-end tools, environmental conservation expertise, and life and well being sciences.
2. Info expertise, comparable to broadband communication infrastructure development and companies. 
3. Superior manufacturing, comparable to Web of Issues growth and multidimensional stereoscopic show and printing expertise.
4. Biopharmaceuticals, comparable to biocatalysts, response and separation expertise growth. 
5. New vitality and new supplies, comparable to photovoltaic vitality expertise and R&D and manufacturing of recent supplies for aviation and aerospace functions. 
6. Transport and logistics, comparable to transport info companies, provide chain administration, and worldwide cruise ship operation and administration companies.
7. Trendy companies, comparable to company administration and the event of digital options.
8. Finance, comparable to reinsurance, cross-border funding and financing, and inexperienced finance. 

The 15 % CIT price will likely be carried out retroactively from January 1, 2022, to December 31, 2026. 

Preferential IIT insurance policies

China’s Ministry of Finance (MOF) has lately rolled out preferential particular person earnings tax (IIT) insurance policies for Hong Kong and Macao residents as a way to facilitate the motion of expertise throughout the GBA. Below the brand new coverage, Hong Kong and Macao residents working in Nansha are exempt from paying the portion of their IIT burden that exceeds that of Hong Kong and Macao respectively. This earnings consists of the great earnings derived from Nansha (together with wages and salaries, labor remuneration, writer’s remuneration, and royalties), enterprise earnings, and sponsored earnings for skills acknowledged by the native authorities.

The Hong Kong and Macao residents working in Nansha can obtain this preferential coverage when dealing with their annual IIT settlement in Nansha. The above is relevant in the entire of Nansha District and will likely be carried out from January 1, 2022 to December 31, 2026.

As well as, international residents working in Nansha are eligible for the GBA-wide IIT subsidy which grants international employers subsidies for the portion of paid IIT in extra of 15 % of the taxpayer’s taxable earnings. This subsidy is obtainable annually till 2023.

Supportive measures for stabilizing international commerce

On August 25, 2022, Nansha District issued a spread of supportive measures to assist enhance international commerce. The measures embrace subsidies for cross-border transport between Guangdong and Hong Kong, export assist for unbiased manufacturers, and enterprise development awards, amongst others. Particularly, the subsidies are:

1. As much as RMB 300 (US$42) per TEU of barge export items departing from Nansha Port and destined for Hong Kong (excluding items transshipped via Hong Kong). Every firm can obtain a most subsidy of RMB 2 million (US$279,544), and the utmost complete subsidy accessible is RMB 20 million (US$2.8 million).
2. A subsidy of RMB 1,000 per journey for vans carrying items throughout Guangdong-Hong Kong-Macao cross-border cargo operation factors, with a most subsidy of RMB 500,000 per firm.
3. A reward of as much as RMB 100,000 (US$139.8) for every further US$10 million that an organization good points in its complete worth of international commerce imports and exports in 2022 in contrast with 2021, with a most of RMB 5 million (US$698,860) for every firm and RMB 40 million (US$5.6 million) complete.
4. Processing commerce corporations which have established their very own manufacturers which have an export worth of US$10 million in 2022 are eligible for a reward of RMB 20,000 (US$2,795) for each 5 % year-on-year enhance of their export worth from 2021. The utmost reward given to every firm is RMB 500,000 (US$69,886).

The supportive measures can be found till December 31, 2022.

Investing within the Nansha District

The Nansha District of Guangdong is constructing upon its strengths as an necessary node within the GBA and key thoroughfare for the import and export of products to and from the area. The district is especially robust in its distribution and logistics choices, which is why it continues to draw international e-commerce manufacturers and firms manufacturing their merchandise within the GBA.

However the district additionally stays dwelling to conventional manufacturing industries and has rising high-end and high-tech manufacturing capabilities. The technological transformation of conventional industries will serve to maintain corporations within the district and make it an more and more aggressive vacation spot for corporations within the GBA.

Furthermore, the district’s expertise sector is anticipated to develop considerably because it prepares to implement the preferential 15 % tax price for strategic and rising industries, which is able to serve to work in tandem with the technological improve of present industrial and repair industries.

This text was first printed on October 12, 2022, and final up to date on November 4, 2022.