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Shenzhen

The Silk Road Economic Belt and the 21st Century Maritime Silk Road together form a strategic initiative, the Belt and Road Initiative, for China to coordinate between domestic and international needs and to reach a new stage in all-round opening-up. Shenzhen faithfully acted on the requirements of the CPC Central Committee and President Xi Jinping, made plans and took actions to play a leading role in the opening-up of special economic zones within the framework of the BRI. Besides, it promoted the development of an open economy in all aspects, and made greater efforts to ensure that the city have its say in the realm of regional economic cooperation and have its influence in the international trade system, so that it can take the lead in the transformation from a large foreign trade market to a strong one of China.

(1) Policies issued by Shenzhen in line with the BRI

In March 2015, the central government issued the Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, and afterwards, the Shenzhen Municipal People’s Government fully mobilized the whole city to participate in the implementation of the BRI and proposed that Shenzhen should be a strategic hub within the framework of the BRI and a bridgehead of the 21st-Century Maritime Silk Road and made arrangements accordingly.

After the Implementation Plan for Guangdong Province’s Participation in the Development of the Silk Road Economic Belt and the 21st Century Maritime Silk Road was issued in June 2015, Shenzhen promptly followed up and formulated the Economic and Trade Cooperation Plan and Foreign Affairs Work Plan for Participation in the BRI. On this basis, Shenzhen further compiled the Implementation Plan of Shenzhen to Vigorously Develop the Economy of the Greater

Bay Area and Actively Serve the Implementation of the Belt and Road Initiative and put forward various specific tasks and measures.

  • (2) Inward and outward investment of Shenzhen in 2015
  • 1) UTILIZATION OF FOREIGN INVESTMENT

In 2015, a total of 3,359 foreign-invested enterprises were set up in Shenzhen, an increase of 34.9% year-on-year; a total of US$25,595 billion of contractual investment was attracted, up 134.92% year-on-year; and the foreign investment actually used was US$6,497 billion, up by 11.93% year-on-year.

Shenzhen made new breakthroughs in terms of the volume and efficiency of foreign investment attraction. Modern services took a dominant position, while finance, leasing and business services, and manufacturing were all hotspots for foreign investment. In 2015, foreign investment in the service sector increased by 146.67% year-on-year to US$24,388 billion, accounting for 95.28% of the total, up 4.54 percentage points over the previous year. The actually used foreign investment was US$5.671 billion, an increase of 24.52% year-on-year or up 8.83 percentage points over 2014, making up 87.28% of the total. The top three industries to absorb contractual foreign investment were finance (US$11,711 billion, up 131.51% year-on-year), leasing and business services (US$3,951 billion, up 151.13% year-on-year), and real estate (US$2,863 billion, up 1,556.99% year-on-year). Foreign investment in the manufacturing industry went up 25.7% year-on-year to US$1.12 billion, with US$815 million actually used, down 26.82% year-on-year.

In 2015, there were 473 projects with a contractual foreign investment of over US$10 million in Shenzhen, an increase of 195 over 2014, and US$22,828 billion worth of contractual investment was brought in, representing about 90% of the total and realizing a year-on-year growth of 181.5%. In December, there were four enterprises involving contractual investment of more than US$100 million, i.e., Shenzhen Wal-Mart Stores Retail Co., Ltd. (equity transfer on premium, contractual investment of US$402 million), Youli International Financial Leasing (Shenzhen) Co., Ltd. (newly established, US$200 million). Shenzhen Yuanjing Financial Leasing Co., Ltd. (capital increase, US$190 million) and Powerise Information Technology Co., Ltd. (M&A, US$155 million).

2) OVERSEAS INVESTMENT

In 2015, Shenzhen enterprises directly invested in and established 1,180 enterprises (institutions) overseas as approved by and filed with the Shenzhen Municipal People’s Government, with the total contractual investment of US$56.63 billion, an increase of 884.06% over the previous year, including US$204.06 billion of contractual investment from the Chinese side, up 286.70% year-on-year. Specifically, Qianhai enterprises invested in and set up 153 enterprises (institutions) with a total investment of US$3,711 billion from the Chinese side.

According to data from the Ministry of Commerce, the actual outward investment of Shenzhen in 2015 was US$5,127 billion, up 28.9% year-on-year, accounting for 48.16% of the total of Guangdong Province and 6.54% of the national total.

i) Investment destination countries and regions. In 2015, Shenzhen enterprises established 910 enterprises (institutions) with direct investment in the Hong Kong SAR as approved by and filed with Shenzhen Municipal People’s Government. Endowed with fully open and highly international business platform advantages, unique geographical location and business environment, the Hong Kong SAR has become the first choice for Shenzhen enterprises to go global, ranking first among all countries (regions) in terms of the amount of OFDI from Shenzhen and receiving 77.19% of the total outward investment from Shenzhen, down 18 percentage points from the previous year. The total investment was USS31.940 billion. 56.4% of the total outward investment of the city, up 679.99% from a year earlier, of which Chinese investment amounted to USS 14.906 billion, representing 73.05% of the total, up 273.02% year-on-year.

The United States ranked second. In 2015, Shenzhen enterprises set up 93 enterprises (institutions) with direct investment in the United States, accounting for 7.88% of the total. The total investment reached US$2,014 billion, making up 3.56% of the total in the same period, of which Chinese investment amounted to US$1,062 million. 5.20% of the total. Singapore, Japan, Thailand and the United Kingdom respectively welcomed 13, 10, 10 and 8 enterprises and institutions established with investment from Shenzhen.

ii) Major investment industries. In 2015, the OFDI from Shenzhen mainly went to the information transmission, software and information technology sendees, with Chinese investment of US$7,722 billion, accounting for 37.84% of the total and involving 168 enterprises. The wholesale and retail industries followed thereafter, with Chinese investment of US$4,152 billion, accounting for 20.35% of the total in the same period and involving 583 enterprises. The rest were leasing and business services, real estate and manufacturing, with Chinese investment of US$2,277 billion (149), US$1,863 billion (27) and US$1,395 billion (110), respectively.

3) PROBLEMS

In respect to the utilization of foreign capital, the quality still needs to be improved. Foreign investment mainly come from a limited number of sources, goes to just a few industries, via limited ways. Little investment actually goes to emerging industries. In tenns of outward investment, Shenzhen has weak competitiveness for overseas investment and cooperation and has not participated much in the implementation of the BRI. Due to its weak ability to contr ol the international market, it has not yet developed an international marketing network and, therefore, could hardly compete for scarce foreign technologies and resources.

  • 152 Development overview
  • (3) Investment in and from BRI countries in 2015
  • 1) INVESTMENT FROM BRI COUNTRIES

In 2015, 30 out of the 64 BRI countries invested in Shenzhen: 147 projects were newly launched, a year-on-year increase of 56, attracting USS 100 million of contractual foreign investment, a year-on-year decline of 22.78%. Singapore and Malaysia were the top sources, with 48 new projects and 26 new projects, respectively. The investment was mainly directed to Shenzhen Dahuitian International Financial Leasing Co., Ltd. (US$32.6818 million) and Shenzhen Zhonglin Financial Leasing Co., Ltd. (USS30 million).

2) OFDI IN BRI COUNTRIES

In 2015, Shenzhen enterprises set up 66 enterprises (institutions) with direct investment in BRI countries, 5.59% of the total and up by 120% year-on-year. The total investment registered US$1.804 billion, accounting for 3.19% of the total and rising 470.89% over the previous year. Chinese investment saw a year-on-year growth of 900% to USS 1.380 billion, accounting for 6.76% of the total. The real estate industry took a dominating position with Chinese investment of US$430 million (5 enterprises); the investment was mainly made in Singapore and Cambodia, with Chinese investment of US$139 million (11 enterprises) and US$431 million (5 enterprises) respectively.

  • (4) Characteristics of inward and outward investment
  • 1) RISE IN BOTH QUANTITY AND QUALITY OF FDI

During the 12th Five-Year Plan period, Shenzhen made new breakthroughs in attracting foreign investment in terms of both quantity and quality. In terms of investment scale, the foreign investment actually used in Shenzhen increased from USS4.599 billion in 2011 to USS6.497 billion in 2015. an increase of about 1.41 times or an average annual growth of 8.6%. In terms of structure, modern services took the lead in absorbing foreign capital and equity investment, financial leasing, commercial factoring and management consulting were also popular fields attractive to investors. Of the existing foreign investment. 44.05% was invested in 8,254 enterprises in the secondary industry, 55.58% in 11,943 enterprises in the tertiary industry, and 0.4% in the primary industry.

2) INCREASINGLY RAPID GROWTH IN OVERSEAS INVESTMENT

The outward investment of Shenzhen enterprises constantly increased and expanded, and the existing overseas investment projects grew significantly. By the end of 2015, 4,288 enterprises in Shenzhen had invested overseas to establish 4,934 overseas enterprises/institutions (4,710 enterprises. 224 institutions). The total contractual investment was US$73.653 billion, of which Chinese investment amounted to US$35.388 billion, ranking first among all Chinese

Regional investment analysis report 2015 153 cities. The investment forms were increasingly diversified, developing from a focus on sales outlets to equal prominence of production, services, R&D, resource development, capital operation and so on. At present, such enterprises as Huawei, ZTE, Tencent, CMHIT, CGNPC, CIMC, BYD. DJ-Innovations and Amer have greatly enhanced their status and competitiveness in their respective industries through deep integration of domestic and overseas resources and efficient allocation of factors. As a result, they have been industrial leaders and successful models of multinational operations. With rapid development in overseas project contracting and labor cooperation, the city saw an amount of overseas contracted projects of approximately US$20 billion, ranking first among large and medium-sized cities. Shenzhen enterprises' investment in information and communications projects covered more than 100 countries and regions and led hundreds of domestic subcontractors and suppliers abroad.

(5) Prospects for 2016

During the 13th Five-Year Plan period. Shenzhen will actively implement the BRI, continuously promote the development of inward and outward investment and gradually boost the development of an open economy. It will pay full attention to improving the “bringing in” structure, constantly increase the proportion of R&D and high-end manufacturing investment of transnational corporations, and make better use of foreign investment in service industry. Active moves will be made to increase the proportion of foreign investment in strategic emerging industries, vigorously expand the scale of foreign investment from developed regions such as Europe, the United States and Japan, and significantly enhance the comprehensive contributions of foreign investment to the economic and social development of Shenzhen. While working hard to implement the going-global strategy, Shenzhen will seek to expand its development space, enhance its capability of transnational operation, expand the global influence of Made in Shenzhen products and build a whole raft of multinational companies with global resource allocation capabilities and influence along international value chains.

1) UTILIZATION OF FOREIGN INVESTMENT IN A MORE

ACTIVE AND EFFECTIVE WAY

i) Stabilizing the scale of foreign investment utilization. Shenzhen will maintain stable, transparent and predictable foreign investment policies, and encourage the existing foreign-invested enterprises to increase their R&D investment, and gradually get itself into a higher position in the industry chain by creating brands, expanding domestic sales and smart production. It will enhance its ability to provide support for key industrial products, encourage foreign-invested enteiprises to increase procurement from within China, and reahze clustered industrial development.

ii) Expanding market access of foreign investment. Shenzhen will work to improve the source structure and industrial structure of its foreign investment utilization andincrease foreign investment. To this end, it will promote the orderly opening-up of the sendee sector, including finance, education, culture and health, lift restrictions on market access for foreign investment in the sendee sector such as childcare and elderly care, architectural design, accounting and auditing, trade and logistics, and e-commerce, and further liberalize the general manufacturing industry. It will encourage foreign investors to invest in modem agriculture, high and new technology, advanced manufacturing, energy conservation and environmental protection, new energy and modern sendee industries and to undertake the transfer of high-end industries. It will encourage and guide the establishment of R&D centers and regional headquarters by foreign-invested enterprises in the city so as to realize the synchronous attraction of investment, technology and intelligence, and provide support for the implementation of the innovation-driven development strategy.

Hi) Introducing representative transnational corporations to Shenzhen. In line with the requirements for building a modern industrial system, Shenzhen will place greater emphasis on promoting investment from key multinational companies in the world and leading enterprises in various industries, and encourage the launch of a number of large high-tech projects in advanced industries that can prompt more foreign investment. The focus will mainly be laid on the introduction of foreign investment from advanced manufacturing industries such as CNC machine tools, smart manufacturing and additive printing, from production service industries like e-commerce, service outsourcing and R&D design, from high-tech industries such as computer and communications equipment, semiconductors and spare parts and key manufacturing links such as industrial software, integrated circuits and display panel, and from strategic emerging industries such as new materials, new energy, biomedicine, and new-generation information technology.

iv) Establishing a foreign investment management mechanism in line with international norms. Guided by a mostly filing-based management system for foreign investment, Shenzhen will delegate power for project approval, strengthen supervision during and after project implementation, and explore to establish a reporting system for major matters concerning foreign investors. It will establish a foreign investment information-sharing platform and an inter-departmental joint working mechanism to build an open and transparent market competition environment. With these efforts, it hopes to realize pre-establishment national treatment plus negative list management within the framework of relevant national policies.

  • 2) SPEEDING UP GOING-GLOBAL
  • i) Supporting enterprises to pool and allocate global resources. Eligible enterprises are encouraged to allocate global resources, energy, technology and talents through various investment and cooperation methods such as the establishment of new facilities, M&A, and project contracting. Shenzhen will encourage technologyintensive enterprises to make use of advanced foreign technological and intellectual resources to set up overseas testing centers and R&D bases, and improve their integrated innovation capability. It will support enterprises in establishing long-term and stable resource allocation bases in key areas such as Southeast Asia, South Pacific, Africa and the Middle East according to market demands.

ii) Encouraging enterprises to participate in the formulation of international standards. Enterprises will be encouraged to actively join in international standard organizations (International Organization for Standardization, International Electrotechnical Commission, International Telecommunication Union, etc.) and participate in the formulation of international industrial standards (for electronics and electricians, semiconductors, new energy, new materials, etc.). Support will be given to the institutions that serve as members of international standard organizations to encourage them to play an active role in the development of international technical standards and price standards.

Hi) Making great efforts in overseas project contracting. Shenzhen will encourage enterprises to make use of their own advantages in industries, technologies, talents and financial resources to participate in bidding for high-tech international projects regarding communications, environmental protection and smart cities and subcontracting of overseas projects. It will make great efforts to develop international design, software system integration and consulting services, and support enterprises to undertake technology- and capital-intensive overseas projects. It will make active moves to push forward international infrastructure cooperation and encourage enterprises to actively participate in overseas projects of telecommunications, power, port and infrastructure building.

iv) Effectively advancing the construction of overseas cooperation zones. Shenzhen will take industrial park construction as a leverage to accelerate the going-global of enterprises in clusters. It will promote the construction of the China-Vietnam (Shenzhen-Haiphong) Economic and Trade Cooperation Park, and support China Merchants, Yantian Port, CIMC and other advantageous enterprises to plan and build a number of port-centered logistics parks and industrial parks in key cities along the Maritime Silk Road. Qualified enterprises will be supported to jointly construct economic and trade cooperation zones or industrial parks in major cities in Indonesia, Thailand and Cambodia and build overseas processing and manufacturing, commercial and logistics bases for Shenzhen enterprises so as to transfer high-quality excess capacity and promote international capacity cooperation. Furthermore, Shenzhen will encourage industrial park development and operation enterprises to go global and invest in the construction of factories in BRI countries, and thus export their park operation and management models. It will further bring into play the role of trade associations and set up industrial cooperation platforms to guide enterprises to well-managed and well-supported overseas industrial parks, and thus enhance the enterprises’ capacity to form clusters for development and investment.

v) Vigorously promoting international R&D cooperation. Shenzhen will promote the cooperative development in biotechnology, new energy, new space carriers, marine products and other fields, so as to realize the integrated development of innovation chain and industry chain. Enterprises will be encouraged to make full use of overseas technological resources and personnel to establish overseas R&D centers in countries and regions with strong scientific and technological strength, and to acquire technological enterprises. Also, Shenzhen will work to spread Chinese technical specifications and standards through overseas operations of its enterprises in BRI countries and developing countries so as to expand the space for international development.

vi) Actively encouraging the export of services. Shenzhen will speed up overseas development of Internet services, e-commerce and online games industries. For advantageous industry chains such as information communications, biomedicine, smart manufacturing and software development, it will encourage enterprises to take part in overseas governmental, corporate and civil facility construction and services projects by means of undertaking system integration projects and providing well-rounded solutions, and thus spur the overall export of products, technologies and services. Shenzhen will promote cooperation in professional services and cooperation with BRI countries in high-end services such as convention and exhibition, logistics, creative design, inspection and testing, tourism and culture, and will support the setup of business headquarters, marketing headquarters, R&D headquarters and fund settlement headquarters by enterprises hi relevant countries.

vii) Building an all-round service support system. Shenzhen will adopt a filingbased management system for outward investment, and establish an accounting system for foreign investment and cooperation. It will improve the distribution of existing overseas offices and support the establishment of trade and investment promotion agencies in BRI countries and emerging markets like Indonesia, and Oceania countries like Papua New Guinea. It will study and establish a “Going-Global Strategic Alliance” and improve the going-global enterprises service system. It will improve the mechanism for managing loans for outward investment and cooperation and innovate in the model of financial support. It will study and compile guidelines for investment and cooperation in BRI countries, explore the establishment of government-led equity investment binds for going-global efforts, and join hands with China Export & Credit Insurance Corporation and other policy financial institutions to speed up the building of an early warning system for trade frictions, establish a risk guarantee mechanism for going-global enterprises and to provide better services in respect to operation monitoring, countryspecific risk assessment, early warning and emergency response.

3) TAKING THE INITIATIVE TO PARTICIPATE IN BRI

IMPLEMENTATION

i) Pushing forward infrastructure development and promoting connection and intercommunication. Shenzhen will comprehensively deploy logistics offices for BRI countries by connecting itself into the traffic network of these countries, and

Regional investment analysis report 2015 157 will build fast and efficient air and sea transportation channels connecting Southeast Asia, Northeast Asia and South Asia to form an integrated transportation system. It will participate in the construction of key ports and jointly construct port-centered industrial parks. Leveraging on its industrial advantages, Shenzhen will deeply engage in the development of a national Information Silk Road to promote information-sharing. In addition, it will actively participate in the formulation and revision of international, national and industrial standards, and promote the connection and alignment of technical standard systems in BRI countries.

ii) Developing close economic and trade ties and facilitating trade financing. Shenzhen will put into actions a special plan for exploring emerging markets and moving into the markets of BRI countries, actively take part in the upgrading the China-ASEAN Free Trade Area, and dig deep into the market potential of Southeast Asian countries and the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor. Actions will be taken to step up cooperation with the Republic of Korea, Australia, New Zealand, Papua New Guinea and other countries, as well as economic and trade cooperation with South and North America. It will also strive to explore Pakistan and other emerging markets, and to get actively involved in the building of the Guangdong-Xinjiang-Europe International Channel. Relying on the multi-party cooperation mechanism of the Silk Road, Shenzhen will build a high-standard comprehensive economic and trade promotion platform, and devote great efforts to constructing the China (Shenzhenj-Vietnam (Haiphong) Economic and Trade Zone and other cooperation zones. Advantageous enterprises will be sustained to develop markets in BRI countries, and go global to establish marketing networks, production bases and regional headquarters. Additionally, efforts will be made to strengthen competitive export advantages, accelerate the development of new trade methods, and raise the relative position of Shenzhen in the global value chain.

Hi) Strengthening cross-border cooperation to secure financing. Relying on the resource allocation capacity of both itself and the Hong Kong SAR, Shenzhen will improve financial services and build financing platforms. It will carry out multilateral financial cooperation, support high-quality enterprises to raise funds abroad, guide financing guarantee agencies to serve small and medium-sized foreign trade enterprises and private enterprises, and guide commercial equity investment funds and private funds to jointly participate in key BRI projects. It will hy hard to attract financial institutions, sovereign funds and investment funds in BRI countries to settle in the city, and vigorously develop trade and financial business. It will strengthen cross-border investment cooperation, take advantage of the favorable conditions brought by the BRI and the “two corridors and one circle,” take an active part in the upgrading of the China-ASEAN Free Trade Area, and build a demonstration platform for overseas economic cooperation and development.

iv) Improving industry chains and expanding cooperation space. Shenzhen will accelerate industrial integration and complementary development with BRI countries,

and build a new regional industrial cooperation system centered around brands, technologies, capital and management. It will encourage advantageous industries such as electronic information to launch capacity cooperation with ASEAN and other countries, strengthen cooperation in marine and offshore engineering and equipment industries, expand the development space of offshore fisheries, and actively participate in the development of national resources in the South China Sea. Enterprises will be encouraged to cooperate with BRI countries in energy and upstream areas, participate in the development of oil, gas and mineral resources, and increase the exports of energy, technology and equipment to and the imports of resources and agricultural products from BRI countries. The industrial cooperation with the Shen-Shan Special Cooperation Zone and Kashgar of Xinjiang will also be promoted to encourage chain transfer of enterprises and capacity.

v) Giving full play to the role of frameworks and platforms and strengthening people-to-people exchanges. Relying on the pilot free trade zones and the Qianhai Shenzhen-Hong Kong Modern Services Industry Cooperation Zone, Shenzhen will build large platforms for economic and cultural exchanges such as the BRI Special Pavilion at China (Shenzhen) ICIF, the Silk Road Special Zone at China Hi-Tech Fair and the Qianhai Cooperation Forum, comprehensively deepen cultural exchanges and cooperation with BRI countries, and enhance the international popularity of the city. The city will get actively engaged in international cultural activities mutually organized by China and the BRI countries, promote cultural exchange projects such as the International Friendship City Culture Week, and encourage the export of cultural products such as radio and television programs, films, press and publications, and education. It will strengthen tourism cooperation with BRI countries and develop special tourism routes along the Maritime Silk Road. It will improve the distribution of sister cities, actively develop amicable ties with BRI countries and their cities, and strengthen extensive friendship, close contact and normal interactions with Chinese and overseas Chinese people in BRI countries.

 
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