The recently-announced Outline Development Plan for the Greater Bay Area of Guangdong, Hong Kong and Macau is an ambitious blueprint designed to attract more foreign businesses and professionals to the region.
We've written previously about China's plans to link Hong Kong and Macau together with nine cities in Guangdong province, all clustered around the Pearl River Delta, creating the Greater Bay Area (GBA). The nine cities are Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing. The GBA has a population of over 70 million and generates over US$1.5tn of Gross Domestic Product, making it a powerhouse to compete with similar city clusters in San Francisco, New York and Tokyo.
China's central government recently issued the latest Outline Development Plan for the GBA (the 'Outline Plan'). It initiates the next phase of economic and social integration for the GBA with an emphasis on innovation and entrepreneurship. This has been supported by the 14 March announcement from the Ministry of Finance (MOF) and the State Administration of Tax (SAT):
- Individual Income Tax (IIT) exemption treatment, subsidising overseas high-level and urgently-needed talents working in the GBA area, including those from Hong Kong, Macau and Taiwan, is now extended to all 9 cities, effective 1 January 2019 until 31 December 2023. This builds upon and replaces the existing policies in Qianhai.
Here's an overview of the key elements of the Outline Plan that are designed to lure more businesses and professionals to the region.
Integrated transport network
Major investment in new transport links has already delivered the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-Macao Bridge. This makes it easy to travel between the two Special Administrative Regions (SARs) and the Chinese cities of the GBA. The continuing massive investment in the high-speed rail network will connect the GBA across all of China. This will dramatically improve the ability for experts and executives already established within the SARs to travel throughout the GBA and China.
Improving transportation alone is of course, not sufficient to achieve the necessary integration of people in the GBA region, and the Outline Plan aims to make the whole GBA equally attractive for both working and living.
Of major concern to families moving from the SARs into mainland China has been the provision of education and quality medical facilities. The Chinese education regulator has already started to offer scholarships to students from SARs territories, and China's National Social Science Fund is now accepting applications from SARS academics to work in universities or research institutions.
The governments of the GBA have established a framework for greater cooperation and investment in medical facilities and skills in the Chinese cities. The agreement encourages Chinese and foreign investment in both western and traditional Chinese medical centres, and many SARs medical professionals have already started to establish centres of excellence on the mainland. There is also agreement to aid the transfer of patients between medical facilities within the GBA to allow SARS families to choose to be treated in their home territory.
Tax policy alignment
Another major issue for SARs residents and enterprises considering a move to the GBA region is the high level of taxation in mainland China, with rates rising to 45% for individuals compared to 15% and 12% in Hong Kong and Macau respectively.
Some local governments within the GBA had already recognised this as a significant issue, and introduced policies within certain economic zones to compensate individuals and corporations working and investing there. The Shenzhen Municipal Government and Zhuhai city government both introduced tax rebates to SAR residents working in the Qianhai and Hengqin economic zones respectively. And Hong Kong enterprises investing in Zhuhai's Hengqin zone also receive a rebate of corporation tax down to Hong Kong levels.
The Outline Plan encourages local governments of the nine cities to offer incentives for individuals and enterprises from the SARs territories, particularly for innovative, young entrepreneurs. The examples of Qianhai and Hengqin have clearly demonstrated the success of aligning tax policies resulting in the MOF and SAT statement that has extended this to the entire area.
Social security cooperation
China has a complex and costly social security system, with contributions by employees and employers into a myriad of social funds; These vary from city to city, so this whole area is complex for any business and individual to fully understand. The Outline Plan identifies this as an area where there needs to be more integration between the nine cities and the SAR territories so that SAR citizens working there can gain benefit from the social funds and enjoy equal benefits in retirement.
What's next for you?
The Outline Plan is an ambitious blueprint for the further development, cooperation and integration of the GBA. It sets out medium and long-term objectives, but the detail of how these will be implemented at the local level is yet to evolve and it is likely to be rife with complexities as each city competes for the talent it needs to generate long term growth.
There are significant incentives offered to SAR individuals and other expats to study, educate and transfer skills into the nine cities and for enterprises to invest there. Firms and individuals must remain alert to the opportunities being offered as the plans become defined policies.
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TMF China can help you to keep pace as new policies are introduced across the GBA and help you to implement new processes to take maximum advantage of the opportunities for your enterprises and staff.
In this dynamic environment it will be ever more important that you maintain high standards of compliance with HR policies and practices. Contact us to find out how we can help you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.