There are currently about 6,000 Hong Kong-funded enterprises in Dongguan. The difficulties they encounter are comparable to the financial crisis in 2008. Some of them are facing the dilemma of plummeting orders, rising overall costs and falling profits. At this crucial moment, the city government of Dongguan has issued the following new policies and measures to help enterprises overcome difficulties and accelerate their transformation and upgrade.
I. Reducing the burdens of enterprises
1. The lifting of port charges by the city government with effect from 1 September 2011 has further reduced the direct burdens of enterprises by more than Rmb300 million. After this, all charges on enterprises authorised by the city government have been abolished.
2. While implementing the central and provincial measures for reducing the burdens of enterprises, the city government has also introduced measures to allow enterprises to defer payment, lower the standards for the charging of fees and reduce or waive charges on enterprises authorised by the provincial government. With effect from 1 July this year, enterprises are no longer required to pay public order fees and their temporary personnel dispatch fees are reduced by half. Public order fees are waived on the floating population with effect from 1 August.
II. Supporting the development of demonstration enterprises
Dongguan issued its Interim Administrative Measures for the Designation of Demonstration Enterprises for the Transformation and Upgrade of Processing Trade this year. The target is to foster in three years 100 processing trade enterprises that show obvious results in transformation and upgrade and can play an exemplary and leading role. These enterprises will be awarded the title of “demonstration enterprises” and will each be issued a lump sum award of Rmb300,000. They will also be eligible for a range of preferential measures. For example, they will be issued the “green passage card for key projects in Dongguan” and given priority in the use of electricity. They are listed by Customs as enterprises with high credibility and given priority in the application of various innovative preferential systems and measures as well as expedited supervision measures.
III. Supporting enterprises in raising funds and seeking loans
Dongguan launched an Rmb1 billion scheme to give enterprises financing support and activated capital amounting to about Rmb67.8 billion in 2008. This year, in order to alleviate the difficulties of enterprises, especially the problems encountered by small- and medium-sized enterprises in raising funds, the government launched another Rmb1 billion financing support scheme and gave enterprises assistance in industrial enterprise loans, direct debt financing, organisation of re-insurance companies, and financial innovation.
1. Qualified industrial enterprises are eligible for interest subsidies equivalent to 30% of the actual amount of interests payable. The amount of interest subsidies given to each enterprise may not exceed Rmb300,000 a year.
2. Enterprises qualified for direct debt financing will be given interest subsidies at an annual rate of 2% on the actual amount raised. The amount of subsidies given to each enterprise may not exceed Rmb1 million a year.
IV. Supporting steady development of micro, small and medium-sized enterprises (SMEs)
The provincial and city governments have introduced policies and measures in support of the development of micro enterprises and SMEs this year. The following are some of the measures announced by the provincial government:
1. The provincial coffers will allocate Rmb250 million to support the independent innovation, transformation and upgrade of key SMEs;
2. Rmb50 million will be allocated to support scientific and technological SMEs in their technology innovation, including the research and development (R&D) and servicing of high-tech products;
3. An Rmb50 million small loan risk compensation fund will be established to give small loan companies risk compensation when they sustain losses in granting loans to small and micro enterprises;
4. The business tax threshold will be raised and qualified micro enterprises and SMEs will be given tax concessions; and
5. Micro enterprises and SMEs will be given preferential treatment in administrative charges, social insurance premiums and land price in accordance with law. Greater financing support will also be given to these enterprises.
At the city level, Dongguan issued the Implementing Measures for Promoting the Development of Micro Enterprises and SMEs in Dongguan this year. These measures also support the development of micro enterprises and SMEs in such areas as fiscal assistance, tax concessions, reduction of enterprise burdens, financing support, market development, and optimisation of administrative services.
V. Helping enterprises step up opening of emerging markets
Many enterprises have come to realise the importance of opening up the domestic sales market because of the sustained shortage of demand in the international market in recent years. However, the majority of enterprises do not understand how domestic sales work. In order to help enterprises open up the domestic market, it is necessary to do three things well. First, provide quality service. For example, processing enterprises are allowed to engage in domestic sales through “centralised declaration”. Qualified enterprises may complete centralised declaration formalities for tax payment on bonded goods for domestic sales in the current month before the 15th day of the following month. Foreign trade, customs and other departments will actively coach the processing enterprises on domestic sales and give them guidance on procedures relating to domestic sales. Second, build domestic sales platforms. For example, domestic sales platforms such as the “Expo for Products (Domestic Sales) of Foreign-Invested Enterprises in Guangdong”, the “Dongguan Taiwan Famous Products Fair” and “T-Mark” have helped end-user consumer goods of enterprises find their way into domestic commercial circulation and expand domestic sales channels. Third, seek financial support from partner businesses. For example, the city coffers have allocated Rmb30 million to create a fund to provide counter guarantee to processing enterprises when they need to apply to their banks for letters of guarantee for payment of Customs deposits for “centralised declaration” on goods sold first and taxed later. The central, provincial and city governments have set up funds to support endeavours of enterprises to open up international markets, support enterprises in “going global” and engaging in multinational business, encourage organisations or enterprises to take part in exhibitions outside the mainland, support enterprises in registering their trademarks abroad, and provide public services for fair trade. In addition, Dongguan has also set up project funds to award enterprises that have increased their payment of value-added tax (VAT) by expanding domestic sales.
VI. Providing mentorship to enterprises in raising productivity
In 2008, in order to help foreign-invested enterprises (FIEs) in Dongguan increase their productivity, Dongguan invited more than 20 mentorship agencies from Hong Kong and Taiwan, including the Hong Kong Productivity Council and the Taiwan Electrical and Electronic Manufacturers’ Association, to set up mentorship centres for the promotion of enterprise productivity. These centres provide enterprises with services like basic assessment, in-depth assessment and project counselling. The government gives FIEs a grant of up to Rmb300,000 for using the productivity upgrade counselling services provided by the Hong Kong and Taiwan agencies.
At present, over 200 Hong Kong-funded enterprises in Dongguan have joined the mentorship platform set up by the Hong Kong Productivity Council. The achievement exhibitions hosted by the centre collectively displayed the achievements made by participating Hong Kong-funded enterprises.
VII. Supporting enterprises in brand building
The provincial and city governments have issued a series of policies to encourage enterprises in brand building. For example, the provincial government will offer enterprises that have been awarded the titles “Famous Trademarks of China” and “Well-Known Trademarks of Guangdong” subsidies of up to Rmb50,000 and Rmb20,000 respectively. Enterprises awarded the use of the title “Name Brand Products of Guangdong” will be given subsidies of up to Rmb20,000.
City-level measures include the following:
1. Enterprises newly awarded the use of the “Famous Trademarks of China” or name brand title of the same level will be given a lump sum award of Rmb1 million. Enterprises newly awarded the use of the titles “Well-Known Trademarks of Guangdong”, “name brand product” or “organic product” will each be given an award of Rmb300,000.
2. Enterprises designated as “key proprietary internationally-famous brands fostered and developed by Guangdong in foreign trade 2011-2013” will each be given a lump-sum award of Rmb100,000.
3. Enterprises will be given an award of Rmb10,000 for each trademark registered on the mainland. The maximum award is Rmb100,000 a year.
4. Enterprises will be given a 50% subsidy for the registration of trademarks abroad. The maximum subsidy is Rmb500,000 a year.
5. Enterprises will be given maximum subsidies of Rmb1 million a year for the acquisition of technology and brands abroad.
VIII. Supporting enterprises in science and technology innovation
Enterprises that actively developed science and technology innovation to raise their technological level will be eligible for tax concessions in accordance with state regulations as well as subsidies from the city coffers.
1. R&D centres of the encouraged category in the Catalogue for Guidance of Foreign Investment Industries that conform to state regulations will be eligible for tariff exemption on their equipment imports.
2. Foreign-invested R&D centres will be exempted from import tariffs, import-related VAT and consumption tax when they import articles for use in scientific and technological development. They will be eligible for full VAT refund on the purchase of domestic equipment.
3. The city coffers will give awards to R&D institutions with independent legal person status set up by foreign investors and to R&D institutions set up within existing FIEs.
4. The city government will give R&D institutions that have been designated as R&D institutions of national-level enterprises or engineering centres of provincial or city-level enterprises lump sum awards of Rmb5 million, Rmb3 million and Rmb1 million respectively.
IX. Encouraging enterprises to expand investment and increase headquarters functions
1. Projects that conform to the Measures for Rewarding the Introduction of Major and Key Investment Projects into Dongguan will be given rewards at a given proportion to their registered capital, with the maximum reward for each project set at Rmb5 million.
2. As a tax concession, FIEs that conform to the Guiding Opinions of Dongguan for Further Strengthening the Work of Attracting Foreign Investment, have an increase in registered capital of over US$10 million and will set up new headquarters will be eligible for grants from increases in the local retention of enterprise income tax. The maximum amount of these grants will be Rmb5 million a year.
3. Newly introduced projects and capital increase projects that conform to the Administrative Measures of Dongguan for the Designation of Major Projects will be eligible for grants from increases in the local retention of enterprise income tax, subsidised loans, subsidies of up to Rmb10 million on the import of equipment, as well as preferential land price and assistance in the recruitment of highly qualified personnel.
4. Existing foreign investment projects that have a total investment of US$100 million or above after merger, acquisition and reorganisation or projects that have an annual output value of over Rmb10 billion will be given a lump sum award of Rmb2 million.
5. Reserve enterprises for listing will be issued the “green passage card for reserve enterprises for listing” and will be able to enjoy priority and preferential treatment. In addition, they will also be given awards or assistance in seeking mentorship from agencies and tax concessions after listing. The maximum amount of these awards is Rmb22 million.
6. Dongguan will set up a special fund for awarding and supporting headquarters economy projects. This fund will be used to subsidise the housing and training expenses of senior headquarters executives of FIEs in China that set up headquarters in Guangzhou and award headquarters enterprises that have increased their contributions to the locally-retained portion of tax revenue.
X. Promoting conversion of processing enterprises into corporate bodies without suspending production
Problems encountered by processing enterprises in their transformation have all been effectively resolved. The following are some of the main preferential policies that enterprises can resort to:
1. The city foreign trade and economic relations bureau, city industry and commerce administration bureau, city environment protection bureau and other departments will join hands to provide “one-stop” service to processing enterprises seeking to transform into FIEs, including alteration of details in the environmental registry and issuance of project approval document and business licence.
2. In the transformation of processing enterprises, non-priced equipment that meets the requirements may be treated as investment and will not be required to make a supplementary payment of import tariffs and import-related VAT. The deadline for this preferential policy has been extended to 31 December this year. It is hoped that enterprises that have not yet undergone transformation will make haste to take advantage of this policy to accelerate their transformation.
3. Procedures for the verification of non-priced equipment to be used as capital of the transformed enterprise will be simplified. Customs declaration forms do not have to be submitted to Customs for verification to make it easier for these enterprises to use non-priced equipment as capital.
4. The city government will give processing enterprises assistance in expenses incurred in the course of their transformation into FIEs.
XI. Creating a smooth customs clearance environment
1. Enterprises may go through the Humen Port “Bonded Logistics Centre” or “the combined two-bin function” instead of the general practice of “one day transit in Hong Kong” to cut logistics costs. The city coffers will give financial assistance to processing trade enterprises and “two-bin” enterprises that use Dongguan’s two-bin service and bonded logistics centre.
2. Foreign trade departments and Customs will actively promote the upgrade of qualified Category B enterprises into Category A enterprises as soon as possible. Enterprises that are not qualified for upgrade into Category A enterprises will be given mentorship to create conditions for their upgrade.
3. Pilots for Customs territory management shall be expanded. While facilitation measures stipulated by the General Administration of Customs and the Huangpu Customs will be applicable to enterprises of Category A or above, greater Customs control facilitation will be offered to enterprises within local customs territories.
4. Efforts will be made to accelerate the upgrade of the import and export functions of bonded logistics centres, make innovations in the “combined two-bin function” of comprehensive bonded warehouses, develop bonded customs supervision areas that meet the needs of the supply chain and have tax rebate functions, guide more enterprises to make use of bonded logistics centres to develop import and export, R&D, testing and inspection, maintenance and other high value-added activities.
XII. Encouraging imports to promote balanced trade
1. For key industrial imports of strategic emerging industries that are listed in the provincial catalogue for priority development and conform to the requirements for intensive land use, the minimum land transfer prices should be calculated at 70% of the corresponding land classification in the National Standards for the Minimum Transfer Prices of Land for Industrial Purposes.
2. The provincial coffers will allocate Rmb250 million each year to encourage and support enterprises in their imports between 2012 and 2014.
3. Manufacturing enterprises that import production equipment listed in the Import Catalogue of Products and Technologies Encouraged by Guangdong from abroad will be given funding support to the amount of 2% of the value of import equipment (calculated at unified Rmb exchange rate) shown on the Customs declaration form, with the ceiling set at Rmb1 million.
4. Enterprises that import advanced technologies from abroad and have won the approval of the city foreign trade departments will be given subsidies equivalent to 5% of the amount of remittance shown on the remittance document for the technology import, with the ceiling set at Rmb500,000.
5. Enterprises that import goods in the form of general trade in excess of the volume imported in the corresponding period of the previous year will be given support at Rmb0.02 per US$1. The starting point for this project funding support is Rmb10,000 a year, with the ceiling set at Rmb1 million.
6. Local enterprises that import container cargoes through deep-water berths at the Humen Port will be given project funding subsidies of up to Rmb1 million a year.