Investment Guide to Guangdong Department of Foreign Trade and Economic Cooperation of Guangdong Province 2010 Speech by the Governor Guangdong Province is located in the southernmost part of the China’s mainland, facing the South China Sea and adjacent to Hong Kong and Macao. It is the pioneer and experimental field in carrying out the reform and opening-up policies in China. For the past 30 years, Guangdong has been taking an active part in the international economic cooperation and competition and has maintained sustained and rapid economic growth. In 2009, its GDP stood at RMB 3908.2 billion, accounting for 1/8 of the national total, ranking first for 21 consecutive years among other provinces in China. The import and export value registered USD 611.1 billion, making up a quarter of the national total, enjoying No. 1 for 24 consecutive years. Presently, enterprises from more than 100 countries & regions have set up over 120,000 enterprises in Guangdong, while Guangdong enterprises have invested in over 90 countries & regions throughout the world. Guangdong has now become one of the regions that has the most comprehensive economic strength and the most dynamic open economy in China. Guangdong has a sound industrial system with world first-class manufacturing and supporting abilities. The 9 pillar industries of GD are electronic information, electric apparatus, petrochemical, textile and garment, food and beverages, building materials, paper-making, pharmaceuticals and automobiles, etc.. The advanced manufacturing industries such as ship building, track transportation equipment, nuclear power equipment, wind power equipment and general- purpose aircrafts have also developed very rapidly, thus forming an advanced manufacturing system of a trinity of land, air and sea. In 2009, the output of family cars amounted to 1 million, ranking second in China. The ethylene production capacity was on the top of the national list. The output value of LCD ranked first while that of electronic information industry accounted for 1/3 of the national total. The LED packing output made up 50% of the world total. “Made in Guangdong” has enjoyed very good repution both in the world and domestic markets. The modern service industries of logistics, fairs and exhibitions have advanced by leaps and bounds. Large-scale fairs in GD are also world-famous such as China Import and Export Fair, China International Hi-tech Trade Fair and China International SME Fair. The pattern of “ two wheel drive” of advanced manufacturing industry and modern service industry has taken initial shape. Guangdong has an excellent investment environment with vast potentials for business start-up and development. Attributed to the sound infrastructure, developed communication system, convenient customs clearance and sufficient gathering of key elements of production such as talents and capitals, the Pearl River Delta area has formed a series of modern cities that have strong feel of the times and Lingnan flavor, especially with further advancement of closer cooperation among GD, Hong Kong and Macao, world-class city clusters of international competence in Great Pearl River Delta have been quickly formed. GD has 3 special economic zones of Shenzhen, Zhuhai and Shantou, 5 economic and technological development zones at national level, 6 high and new tech development zones, 15 bonded, logistic and controlled areas, 33 provincial industrial parks and some development zones at provincial level, all of which provide diversified platforms and carriers for multinational corporations. Today, cumbering with the duties of being a pioneer in pushing forward the scientific development and promoting a harmonious society, Guangdong will thoroughly carry out the scientific concept of development, comprehensively implement “The Outline of the Plan for the Reform and Development of the PRD”, accelerate to promote the transformation of economic growth mode, strive to explore the experimental zones of scientific development pattern, deepen the advanced reforming areas, broaden a more open international gateway, form a world-class base for manufactural and modern service industries and become an important economic center in the whole country. All these will create boundless opportunities for cooperation and development. We are looking forward to working hand in hand with both domestic & overseas investors to strengthen mutual beneficial cooperation and create more prosperous future. Governor of People’s Government of Guandgong Province Contents I. Overview of Guangdong Province 1. Geographical advantages 2. World famous Lingnan culture II. Economical Development 1. Economic aggregate ranking No.1 in China 2. Foreign trade ranking No.1 3. Continuous development of foreign investments 4. Underway overseas investment and cooperation III. Industrial Features 1. Made in Guangdong: the best quality 2. Sound and convenient industrial supporting 3. Constantly improved innovative capability IV. Investment Environment 1. Sufficient gathering of key elements of production 2. Sound and convenient infrastructure 3. World renowned large-scale exhibitions 4. Diversified platforms to undertake investments 5. Sound investment service system 6. Continuously expanding market volume V. Investment Opportunities 1. Strive to become a vanguard carrying out the Scientific Outlook on Development, create endless business opportunities by reform and development. 2. Accelerate construction of modern industrial system, with promising potential for international communication and cooperation 3. Promote transformation and upgrading of the processing trade, with immense room for trade investment & cooperation VI. Investment Incentives Ⅶ. Approval Procedures of Investment Appendix 1. Investment cost II. Service Organizations III. Business Contact IV. Living Information I. Overview of Guangdong Guangdong, also known as “Yue”, is located in the southern part of China, bordering Hong Kong, Macau, Guangxi, Hunan, Jiangxi, Fujian and Hainan across the sea. The province is joined by 19 cities at prefectural level and 2 at sub- provincial level (namely Guangzhou and Shenzhen), with Guangzhou as its capital. At the end of 2009, the permanent population of Guangdong reached 96.38 mil. In addition to the pride of the economically strongest province in China, Guangdong also possesses a long history, unique culture, pleasant climate, beautiful environment, logical administration and harmonious people, as well as developed commerce and trade. 1. Geographic advantages Guangdong is situated at the coast of the South China Sea, neighboring Hong Kong and Macau and located at the banks of the Pearl River; it is the central economic zone of Southern China and Southeast Asia. 800 kilometers from east to west and 600 kilometers from north to south give a land area of 178,000 square kilometers; in addition, its coastline is 3,368 kilometers long and the sea area is 419,000 square kilometers. Guangdong lies in the sub-tropical zone, one of the regions with the most abundant resource of light, heat ,water and ocean in China. The annual average temperature is 22.3%. It has plenty of rain, with annual average precipitation of 1500mm-2500mm. 2. World famous Lingnan culture With a long history of developing foreign relationship, Guangdong has been one of the earliest and most important trading ports in China and also the starting point of the historically famous Maritime Silk Road. As early as in the Tang Dynasty, Guangzhou City in Guangdong was already a well-known foreign trading port. In 1978, Guangdong was the first province in China to take part in the “special policies & flexible measures” and became an anticipatory province, experimental zone and foreland under the Reform and Opening-up of China. Guangdong is a famous hometown of overseas Chinese. There are more than 30,000,000 Chinese, overseas Chinese and compatriots of Hong Kong and Macao (whose ancestor home is Guangdong) living in more than 100 countries and regions all over the world. Guangdong is a cradle of Chinese modern industry and national industry. In Qing Dynasty, Foshan became a handicraft center and one of the “Four Famous Towns” in China. Lingnan culture is with a long history and profound deposit as well; its cultural feathers such as opening up, tolerance and innovation are well known throughout the five continents in the world. II. Economic Development 1. Economic aggregate ranking No.1 in China Since China’s Reform and Opening-up in 1978, Guangdong has had its comprehensive economic strength rapidly becoming the leader in China. From 1979 to 2009, the annual average GDPs of Guangdong kept rising at a rate of double digit and was steadily ranked No.1 in the China’s mainland. In 2009, while Guangdong actively tackled the worldwide financial crisis and vigorously facilitated the tactic of “3 Promotions and 1 Keeping”, the annual GDP increased by 9.5% with a total amount of RMB 3,908.2 billion , equivalent to 11.6% of the country’s GDP and ranked No.1 for the 21st consecutive year. In terms of other important economic indexes such as tax income, fiscal revenue, total retail sales of consumer goods, industrial added values, and savings of residents, Guangdong has ranked No.1 in China as well. Figure: The total production values of Guangdong in 1979 – 2009 (unit: RMB 100 million) 2. Foreign trade ranking No.1 Foreign trade development of Guangdong has always been in the forefront of China. The total volume of foreign trade increased as high as nearly 400 times from 1978 to 2009 with an annual average increasing rate of 21%. In 2009, under the extremely difficult financial condition, both domestically and internationally, Guangdong Province still achieved a total volume of foreign trade of 611.1 billion USD or 27.7% of that of the entire country, ranking No.1 for the 24th consecutive year. Figure: Guangdong’s foreign trade values in 1978 – 2009 (unit: 100 million USD) The imported and exported products of Guangdong are mainly mechanical & electrical equipments and hi-tech products. According to China’s custom records, the export of mechanical & electrical equipments and hi-tech products in 2009 accounted for 69.7% and 38.8% respectively of all exports of the province, with their weightages in the country receiving year-on-year increases of 0.6% and 1.2%. The imports of mechanical and electrical equipments and hi-tech products accounted for 62.5% and 45.6% respectively of all imports of the province. Import of bulk goods maintained a steady increase; among which unfinished plastic products, unwrought copper and copper materials as well as crude oil increased by 9.6%, 9.0% and 1.5% respectively; imported vegetable oil, foodstuff, dried and fresh fruits increased by 2.9%, 39.7% and 47.2% respectively. Hong Kong, USA, European Union and Japan are traditional trading partners of Guangdong. In 2009, Guangdong’s foreign trade with Hong Kong, USA, European Union and Japan amounted to 119.91 billion US dollars; 80.88 million US dollars,73.85 billion US dollars and 53.49 billion US dollars respectively, contributing to 53.7% of the foreign trade of the province. In recent years, Guangdong has been rapidly increasing its foreign trade with new partners and regions such as the Association of Southeast Asian Nations (ASEAN), Africa, and Latin America. In 2009, Guangdong has maintained a good momentum in foreign trade among new markets in Africa, Latin America, the Middle East, Russia and India, increasing the proportion in the total volume of foreign trade of the province. The top 10 trading partners in 2009 were Hong Kong, USA, European Union, the Association of Southeast Asian Nations, Japan, Taiwan, Korea, the Middle East, Africa, and the 12 countries in South America. Processing trade is another specialty and advantage of Guangdong. In 2009, the foreign trade concerning the processing industry amounted to 355,940 million US dollars or 58.2% of the province’s total value of foreign trade. With the Chinese government has encouraged domestic sales of products, domestic sales of the processing trade companies broke through RMB 800 billion. 3. Continuous development of foreign investments Since the Reform and Opening-up, Guangdong has been actively encouraging and attracting foreign investments. By the end of 2009, Guangdong has attracted direct foreign investments in 149,000 projects, contributing to contractual foreign investments amounted to 369.68 billion US dollars and actual inflow of foreign investments amounted to 233.2 billion US dollars, equivalent to a quarter of the foreign investment in the entire country. In 2009, Guangdong’s actual inflow of foreign investments reached 19.54 billion US dollars with an increase of 1.9% from last year, and a 1% increase in its weightage in the entire country. The top 10 countries and regions making actual investments are Hong Kong, British Virgin Islands, Japan, Samoa, Singapore, Cayman Islands, Macau, Taiwan, USA and Mauritius in sequence. Along with the continuously economical and social development of Guangdong, the investment environments, both hard and soft, have continued improving, and the industries with foreign investments have developed towards advanced level and heavy type, specifically, concentrating on those with intensive capital, technology and knowledge such as the information technology industry, petrochemical industry, automobile industry and equipment manufacturing industry. Developed countries and multinational companies are playing a dominant role. Among the Global Top 500 enterprises, more than 180 of them have invested in and established over 700 entities in Guangdong; and there have been over 300 research & development centers under foreign investment. In 2009, the Global Top 500 enterprises newly invested in or increased capital in 83 new projects in Guangdong, giving a total investment increase of 10.04 billion US dollars; the average contractual investment per project was recorded as 23.27 million US dollars, with an increase of 114.3%. The service industry is a new contributor to the foreign investment in Guangdong. In 2009, the foreign investment actually utilized by the service industry amounted to 7.58 billion US dollars with an increase of 6.3%, equivalent to 38.8% of the whole province. Other fast growing industries in actual absorption of foreign investments are mainly the financial industry, wholesale & retail industry, scientific research, technical service industry, geological investigation industry, water conservancy, environment and utility management industry. 4. Underway overseas investment and cooperation A group of solid companies in Guangdong have operated to international scale in various ways and achieved noticeable progresses. Since 2006, direct foreign investment of Guangdong has always ranked No.1 in China. By the end of 2009, Guangdong enterprises had established 2,378 non-financial-type entities in over 90 countries and regions, with agreed investment of 10.880 billion US dollars. Specifically in 2009, the province had 356 non-financial entities approval to be established overseas with the accumulative agreed investment of 1.497 billion US dollars, mainly invested in Hong Kong, Macau, Asia, North America and other markets. Overseas investments are heading towards high end, and the investment scope are changing from orientation to trading companies and trading agencies to orientation to production & processing, cooperating resource development, establishment of research & development centers and exhibition centers etc. Turnover of overseas project contracting and labor cooperation ranked No.1 in the country. Overseas project contracting, mainly around hi-tech projects, has higher and higher contribution from with high technical contents such as telecommunication, mobile communication as well as complete sets of mechanical & electrical equipment. In 2009, new overseas project contracting and labor cooperation programs amounted to 8.61 billion US dollars; turnover of completed overseas projects amounted to 7.590 billion US dollars with an increase of 10.6%; turnover of completed labor cooperation programs amounted to 0.59 billion US dollars with an increase of 1.8%; the number of workers sent overseas amounted to 33,000. III. Industrial Features Guangdong serves as one of the most important bases for the manufacturing industry in China and even the world. After years of development, it has formed 9 pillar industries as well as over 100 internationally competitive industrial clusters and regional brands. Enterprises in the province have constantly improved their capabilities in independent innovation, with a sound & convenient industrial supporting system, and the quality of their products has ranked No.1 in China. At present, Guangdong has been speeding up transformation of its industrial development mode: establishing a main industrial cluster driven by modern service industry and advanced manufacturing industry, building 8 major carriers with powerful driving force, optimizing industrial development environment, establishing a modern industrial system not only connecting the world but also reflecting characteristics of Guangdong, and striving to become a vanguard for modern industrial development throughout the country. Over various industries, there have been nurtured ample business opportunities for investors. 1. Made in Guangdong: the best quality Guangdong has been actively implementing a series of strategies such as “quality products bring prosperity to the province”, “make local brands”, “dual transfer” and “dual improvement” in order to promote “Made in Guangdong” from quantitative change to qualitative change. In 2009, manufacturing industry of Guangdong had its integrated competitiveness index ranked No.1 in China. Presently Guangdong has 4 world brands, namely Huawei, Gree, ZTE and CIMC, ranking No.1 in China as occupying 40% of that of the country. There are still 303 national brands and 1,104 provincial brands, progressively forming over 100 relatively competitive industrial clusters and regional brands such as Shunde Home Appliances, Shenzhen Jewelries, Foshan Ceramics, Nanhai Aluminum, Humen Fashion and Shiling Leather Goods etc. 2. Sound and convenient industrial supporting Guangdong has a sound industrial system possessing world state-of-the-art capabilities of production, processing and supporting. In addition to hi-tech industries, there are 9 pillar industries from electronic information, electrical machinery, petrochemical, textile & clothing, food & beverage, building material, logging & papermaking, medicine to auto industries. All these industries have formed many internationally competitive industrial clusters in the aspects of electronic information, home appliance, fashion, furniture and metal works. Moreover, 80% of cell phone parts & accessories, 90% of computer parts & accessories as well as 100% of color television parts & accessories can be produced and assembled in Guangdong Province. Productive service industries such as finance, exhibitions, logistics, and information have been growing rapidly in Guangdong: business agency services under continuous innovation, logistic markets under higher opening-up, and international commercial exhibitions under concentrated development. The electronic information industrial gallery focusing mainly joined by Shenzhen, Guangzhou, Dongguan, Huizhou, Foshan and Zhongshan provides a wide range of products as well as full service and support capability. At present, Guangdong is speeding up the construction of a new hi-tech industrial belt and world advanced manufacturing base, building a modern service industrial clustering zone as well as airport- harbor economic circle centering Guangzhou and Shenzhen, and actively constructing a base city outsourcing Chinese services and a center supporting the international service industry, all of which will provide good conditions for investors to develop in Guangdong. 3. Constantly improved innovative capability Guangdong is fully implementing the Outline of the Plan of Guangdong for Independent Innovation and vigorously carrying out the strategy of technical standards. In the next 10 years, Guangdong will further optimize the environment of independent innovation; promote the modern industry to make breakthrough of core technologies and key generic technologies, boost enterprises to become the main body of independent innovation, drive hi-tech zones and professional towns to develop innovative industrial clusters, achieve transformation of economic and social development from key elements to innovation, from a single innovation to multiple innovations, from “Made in Guangdong” to “Created by Guangdong” or “Innovated by Guangdong”. At present, 16,000 different products in the province have adopted international standards and foreign advanced standards and thus earned a “passport” to the international market. Guangdong had led or participated in formulation or revision of 148 international standards, 1,079 national standards and 1,284 industrial standards, in order to control the commanding point of competition with the right to speak. IV. Investment Environment Guangdong continues optimizing its investment environment. Sufficient gathering of talents, capital and other key elements for production, sound & convenient infrastructure, sound investment services, a variety of well-known large- scale exhibitions, diversified platforms to undertake investments, and expanding market capacity, all these advantages make it possible to provide vast investment space as well as low-cost and quality service in good faith for investors. 1. Sufficient gathering of key elements of production Guangdong is the most vibrant and active region in China. The close cooperation among Guangdong, Hong Kong and Macau has allowed sufficient gathering of key elements for production. The Pearl River Delta region has formed a batch of modern cities rich in both flavor of the times and characteristics of Lingnan (namely the south of the Five Ridges in Southern China), recognized as one of the Top 3 intensive urban areas in China and one of the regions with the most vitality and the fastest economic growth in China and even the world. Presently, the financial sector of Guangdong ranks the first in China’s mainland in terms of outlet number and staff size; the stock market also takes the lead in China’s mainland in terms of its financing aggregate and number of stock exchanges. With the state-owned commercial banks as the mainstay, and together with policy banks, other commercial banks, non-bank financial institutions and foreign financial institutions, a comprehensive financial system has been established. Under the circumstances of economic amalgamation in Gaungdong and Hongkong-macau area, the demand for regional financial cooperation is reinforced. Presently, by taking the complementary advantages, the financial cooperation between Guangdong and Hong Kong & Macao is forging ahead toward the construction of a Great PRD financial circle, which takes Hong Kong as the lead, Guangdong and Shenzhen as the supports, and aims at promoting cross-national cooperation between financial institutions. Guangdong also has a structure-reasonable and well-supported education system that supplies endless scholars and talents to assist in the economic and social development. The province is furnished with more than 100 universities and colleges, over 400 state-owned independent R&D institutions, scientific & technological information and literature organizations at county level or above, over 1,900 medium and large-scale technical development institutions for industrial enterprises, over 300 engineering research centers above the provincial level, and more than 7,700 private technical enterprises, and more than 1,4 mil professionals. 2. Sound and convenient infrastructure Guangdong is the transportation hub in the southern part of China with sound infrastructure. It has been connected to over 1,100 ports of more than 130 countries and regions in the world. There is also an efficient highway and railway network accessible from all directions. As the region under the highest intensity of airports in China, it has possessed 7 major civil airports, 6 of them in Shenzhen, Shantou, Zhuhai, Foshan, Zhanjiang and Meizhou respectively and the other one in Guangzhou, known as the Guangzhou New Baiyun Airport and standing as a Top 3 major air hubs in China. In 2009, the import and export goods at the ports of Guangdong reached 320 million tons, with the annual cargo handling capability of Guangzhou Port ranked the third in China, and the container handling capability of Shenzhen Port ranked the fourth among the container ports in the world. 3. World renowned large-scale exhibitions Guangdong vigorously develops international and professional trading fairs and exhibitions. The China Import & Export Fair has been a comprehensive international trading fair with the longest history, highest level, largest scale, most complete variety of products, most visitors and best transaction performance in China at present. Other fairs well known throughout the world include the China International SMB Expo, China International Hi-Tech Trade Fair and Guangdong Foreign-invested Enterprises Commodities (Domestic) Expo. Tens of thousands of guest businessmen gather in Guangdong to enjoy and share business opportunities. 4. Diversified platforms to undertake investments Guangdong has possessed multi-layer, diversified and modern platforms to undertake investments. In the province, there are 3 special economic zones (namely Shenzhen, Zhuhai and Shantou), 5 national economic & technical development zones (namely Guangzhou Economic & Technical Development Zone, Zhanjiang Economic & Technical Development Zone, Nansha Economic & Technical Development Zone, Dayawan Economic & Technical Development Zone and Zengcheng Economic & Technical Development Zone), 6 national hi-tech industrial development zones (namely Guangzhou National Hi-Tech Industrial Development Zone, Shenzhen High-Tech Industrial Park, Zhuhai Hi-tech Industrial Development Zone, Zhongshan National Torch Hi-tech Development Zone, Foshan National Hi-Tech Industrial Development Zone and Huizhou National Zhong Kai Hi-Tech Industrial Development Zone), 15 bonded logistics supervision areas such as Guangzhou Export Processing Zone, Shenzhen Yantian Port Bonded Logistics Park as well as a group of provincial development zones. Such multi-layer modern platforms to undertake investments provide diversified options for multinational companies. 5. Sound investment service system With logical administration and harmonious people, Guangdong has a high degree of economic marketization. Since the Reform and Opening-up, Guangdong has taken the lead to keep pace with international economy, abided by the principle of market economy and international conventions, protected intellectual properties, and safeguarded investors’ legal rights and interests. The entire province has formed such a social atmosphere as respecting knowledge, talents and innovation. Guangdong has established multi-level intermediary organs and administrative bodies servicing traders and investors and possessed an efficient clean-fingered administrative service system. At present, Guangdong is actively promoting port reform, accelerating the computer networking of enterprises with various departments such as foreign trade and economic cooperation, customs, inspection & quarantine, taxation, foreign exchange departments, improving the efficiency of customs clearance, and promoting business styles of “one stop”, “coordinated process”, “one window”. Such perfect investment service system will provide comprehensive quality services to investors. 6. Continuously expanding market volume The per capita disposable income of Guangdong’s residents has been increasing steadily for many years; their consumptive power is becoming stronger and concurrently the market volume is expanding. In 2009 in the province, the urban per capita disposable income was RMB 21,574.72 while the rural per capita net income was RMB 6,906.93, with the actual growth rates of 12.0% and 10.7% respectively. The total retail sales of consumer goods of the province amounted to RMB 1,489.18 billion (equivalent to 219 billion USD) with an increase of 16.3%. At present, the Chinese government has been encouraging foreign-invested enterprises and processing trade enterprises to domestically sell their products. In 2009, the domestic sales of the processing trade companies broke through RMB 800 billion. Guangdong has already become a manufacturing and processing base for multinational companies and an important base for developing the domestic markets of China. V. Investment Opportunities The next 10 years is a significant period for Guangdong to accelerate the transformation of its economic development mode and take the lead in modernization. Guangdong is implementing the Outline of the Reform and Development Plan of the Pearl River Delta Region (2008-2020) (hereafter referred to as The Outline of Plan), and accelerating establishment of a modern industrial system. As Guangdong constantly boosts its reform development, infinite business opportunities will be available for investors. 1. Strive to become a vanguard carrying out the Scientific Outlook on Development, create endless business opportunities by reform and development. Guangdong will continue to liberate thoughts, endeavor to implement the strategic objectives of the Outline of Plan, and boldly explore for the experimental area in the mode of scientific development, the priority areas for reform deepening, and the further opened major international gateway, the base of world advanced manufacturing industry and modern service industry, and the national important economic center,. By 2012, Guangdong will be the first to build a moderately prosperous society, preliminarily form out the systems and mechanism for scientific development, significantly upgrade the industrial structure, remarkably enhance independent innovation capability, optimize the ecological environment, and further boost the co-development of the economies of Guangdong, Hong Kong and Macau. By 2020, Guangdong will take the lead in modernization, basic establishment of a sound system of socialist market economy, formulate the industrial structures oriented to the modern service & advanced manufacturing industries, form world advanced scientific & technical innovation capabilities, and after Hong Kong & Macau join to distribute works, cooperate and make respective advantages complementary, become one of the metropolitan circles with the highest core competence. 2. Accelerate construction of modern industrial system, with promising potential for international communication and cooperation Guangdong focuses on enhancing independent innovation capabilities, actively promotes industrial transformation and upgrading, establishes the industrial development pattern with hi-tech industries as the pioneer, pillar industries as the support, and service industry under rapid harmonious development, so as to further improve the international competitiveness and sustainability of Guangdong. By the year 2020, Guangdong will strive to realize the following objectives: the proportion of the added value of the modern service industry in that of the whole service industry is expected to exceed 60%; the proportion of the added value of the advanced manufacturing industry in that of the whole service industry is expected to be more than 50%; the proportion of the added value of advanced manufacturing in that of the whole service industry is expected to reach 30%; the number of companies with operation income exceeding RMB 100 billion is expected to reach 20 more or less, and the number of world brand products is expected to reach 20 more or less. At present, Guangdong is mainly developing six major industries that focus on the modern services industry and advanced manufacturing industry, namely, modern service industry focusing on productive services, advanced manufacturing industry with the equipment manufacturing industry as the mainstay, hi-tech industry oriented to electronic information, advantageous traditional industry driven by brands, modern agriculture with quality benefit as the first consideration, and the fundamental industry supported by energy, transportation, water conservation & others. As the priority among priorities, Guangdong will concentrate on construction of the eight major carriers of the modern industrial system: Modern Industrial Core Area in the Pearl River Delta, Industrial Transfer Parks in the East and West Wings and Mountain Areas, Digital Guangdong, Guangdong Cyclic Economy System Project, the Great Business Circle of Modern Circulation in Guangdong, Financial Cooperation Platform among Guangdong, Hong Kong and Macau, Cultural Originality Industrial Circle along the Two Shores of the Pearl River, and National Demonstrating Area for Processing Trade Transformation and Upgrading. Guangdong welcomes worldwide enterprises to participate in the construction of Guangdong’s modern industrial system, encourages foreign investors to invest in the hi-tech industry, modern service industry as well as research & development and operation centers etc. Guangdong looks forward to communication and cooperation with worldwide investors in the fields of energy, transportation, environmental protection, logistics and tourism, actively develops Sino-foreign joint-venture and cooperative pilot projects in the fields of finance, education, medical care and culture, and sincerely invite overseas talents to make investments and build businesses here. 3. Promote transformation and upgrading of the processing trade, with immense room for trade investment & cooperation Guangdong insists on the guiding principle of “government guidance, enterprise independence, market operations, making respective advantages complementary to each other, and creating a win-win situation”, boosts the processing trade to achieve transformation and upgrading of product structure, corporate structure, industrial structure and market structure, mainly drives the processing trade to expand sales in the domestic market and improves competitiveness of the processing trade industry. The objectives of Guangdong’s processing trade development are expected as follows: by 2012, the processing trade industry will achieve further optimization and preliminarily realize distribution by echelon and cluster development. Whereby, the Pearl River Delta region will play the role of clusters of the advanced manufacturing and modern services industries, and the northern, eastern and western regions will undertake industrial transfer from the Pearl River Delta region and finally form a development pattern joined by labor and technology intensive industries. Guangdong will remarkably upgrade the processing trade industry as a whole, significantly enhance supporting and innovation capabilities as well as core competence, constantly extend the industrial chain and further improve technical contents & value-added ratio of products. Now Guangdong is implementing a series of policies and measures that can promote transformation and upgrading of the processing trade, in order to improve the innovation capabilities of over 30,000 processing trade enterprises in the province, further extend the industrial chain, and expand the domestic market while promoting steady development of such enterprises. VI. Investment Incentives 1. Income tax preferential policies on investment in high-tech industries According to the measures outlined in January 1, 2008 “Enterprise Income Tax Law”, clearly state that the government must give full support to high-tech enterprises by reducing enterprise income tax by 15%; enterprises are no longer subjected to the restriction imposed on whether they are in the National Hi-Tech Industrial Development Zone. 2. National preferential policies on export processing zones According to the Interim Measures for the Supervision and Administration of Export Processing Zones of Customs of the People's Republic of China and China 抯 Administration of Foreign Exchange concerning the Interim Measures for the Administration of Foreign Exchange and State Administration of Taxation on the Interim Measures for the Administration of Taxation on Export Processing Zones, the main preferential policies on the export processing zones includes: (1)Import tariffs and import-related taxes ●Imported machinery, equipments, molds and parts for maintenance and repairs required by the enterprises for production in the zone, imported machinery, equipments and building material required for production in the region 抯 infrastructure construction projects and the building materials required to build production plants, warehouse facilities; imported office supplies for personal use by the administration of domestic and foreign enterprises are all exempted from taxes. ●The imported raw materials, parts, packing materials and perishable materials required by domestic enterprises in the region to produce the export products are fully bonded. ●When the scraps, remnants, seconds and waste materials from the products processing of the enterprises within the district and its production process are disposed outside; unless required by laws and administrative regulations; it will be exempted from export tariffs. No quota required and permit required management ●The imported transportation equipment for personal use and supplies for daily living for workers purchased by the enterprises and the administrative organizations in the region must pay tax according to regulations. (2) The Export Rebate ●When entering and exiting the processing zone within China, the supplies provided for the enterprises in the zone such as machinery, equipments, raw materials, parts, components, packaging materials made in China and the office stationary and building material required by processing enterprises and administration departments can apply for export rebate base on relevant regulations and procedures. ●The suppliers used for daily living for workers and transportation equipment purchase by the enterprises and administration organization in the zone cannot apply for tax rebates. ●When entering the export processing zone from within China, the machineries, equipments, raw material parts, components, packaging materials, infrastructure materials which have been dealt with the formalities of tax on import, ea list of the above items must be submitted to the customs and follow the procedures on export declaration.. The items will be released after inspection and acceptance of the customs. In the above goods and material, the paid import duties, import value-added tax and consumption tax are non-refundable. ●When the products based on domestic technology are unable to meet the requirements, it is necessary to move the goods prohibited for export to the processing zones for further processing; report to the competent department of foreign economic and trade for approval and the customs shall implement supervision and administration according to the management measures on the export material processing. With respect to the goods that enter the export processing zone, tax rebate cannot be issued without signed export goods customs declarations. (3) Domestic tax policies on export processing zones The products produced in the export processing zone and taxable services are exempted from VAT and consumption tax. Other domestic taxes (such as income tax, local tax etc) should be handled according to the existing national policies and regulations on taxation. VII. Approval Procedures of Investment The Examination and Approval Procedures for Establishment of Joint Ventures, Cooperative Ventures and Exclusively Foreign-Owned Enterprises Cooperation parties negotiate Pre-ratification of the name of the enterprise (by the Industrial and Commercial Bureau in the location of the registration) Foreign invested enterprise (Sino-foreign joint ventures, cooperative ventures and wholly foreign owned ventures) should submit the feasibility study reports, contracts, the articles of association along with other materials required to the local authorities of foreign trade and economic cooperation (at county level/municipal level) in the location of the enterprises and the Department of Foreign Trade .If establishing full foreign-owned enterprises, please submit the feasibility study reports, contrats and the article of association . The competent department of local foreign economic and trade shall carry out examination and approval according to the relevant authorities for examination and approval or submit to higher level of authority for approval. Foreign invested enterprises (Sino-foreign joint ventures, cooperative ventures and wholly foreign owned ventures) should apply to approving authorities for the approval certificate. Business registration (in municipal or provincial administration for industry and commerce) Establishment of enterprise Making company seal (in local public security bureau) Applying for code of enterprise (in provincial technology supervision bureau) Foreign exchange opening taxation customs financial registration bank accounts registration registration registration labor administration commodities inspec- animals and plants insurance entry/exit registration tion procedures quarantine procedures procedures formalities 1. The above describes general procedures to apply for foreign invested enterprise. 2. Foreign invested enterprise with a total amount of less than USD 100 million, and listed in Encouraged Catalogue and Permitted Catalogue (not including infrastructure and mining) can directly submit feasibility study report, contract and articles of association to municipal authority in charge of foreign trade and economic cooperation. 3. For those projects that are beyond approval limit of our province, or under direct control of central government, Provincial Development and Reform Committee, Economic and Trade Committee, Department of Foreign Trade and Economic Cooperation should submit them to organizations authorized by State Council for approval. 4. For more details of every procedure, please contact concerning department. 5. Investors are requested to apply to the respective administrative committee if their projects are to be established in the state-grade development zones, tax-protected zones and export processing zones.