23 July 2019

Shenzhen lifts cloud over Qianhai policy

Expectations are running high after reports that Shenzhen will unveil a new round of initiatives to speed up the development of Qianhai, a special zone tipped to replicate Hong Kong’s efficiency and ease of doing business.

The 25-point package provides details of a framework adopted by the State Council in June last year, 21st Century Business Herald reported, citing a source close to municipal authorities. 

It sets out regulations for the financial and legal services industries and removes a key hurdle for companies seeking to establish operations in the special zone. These are in addition to recently announced policies on land auctions and approval procedures.

However, regulators have yet to decide how foreign private equity funds, including those based in Hong Kong, can provide exchange settlement and fund management services in Qianhai.

Also, the People’s Bank of China and the State Administration of Taxation have reservations about giving the financial sector discounted tax rates, reportedly as much as 15 percent for corporate income tax, according to Nanfang Daily.

Another gray area is commercial mediation. Although the central authorities have agreed in principle to allow Hong Kong arbitration entities to establish branches in the zone — a much-awaited policy loosening that may open opportunities for Hong Kong legal professionals and consultants in a bourgeoning market — the Ministry of Justice thinks otherwise.

It considers mediation of commercial disputes as a form of legal jurisdiction and thus is not open to foreign entities. Shenzhen officials said there has been little progress on a consensus. The new details could provide a solution.

Analysts are generally upbeat that the new measures will drive Qianhai’s progress toward a business-friendly pilot zone.

These will be especially helpful to a number of key players awaiting a more clear-cut policy. These include China International Marine Containers (000039.CN, 200039.CN), Chiwan Wharf Holdings (200022.CN), China Union Holdings (000036.CN), Shenzhen Special Economic Zone Real Estate (200029.CN) and Shenzhen Properties & Resources Development (200011.CN).

A high-level inter-ministerial meeting scheduled for next year and mainly comprising officials fromf the National Reform and Development Commission, Ministry of Commerce, Ministry of Finance and the banking and securities watchdogs, is expected to tackle other issues early next year.

– Contact the writer at [email protected]



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