16 January 2009, the provincial government promulgated “The Notice of Guangdong Province’s Policy Supporting Hong Kong, Macao and Taiwanese Funded Enterprises against the International Financial Earthquake and Assisting in Speeding up Their Transformation and Upgrade”(Guangdong Province Office [2009] No.3), announcing the implementation of 30 measures to support Hong Kong, Macao and Taiwanese enterprises in China against the international financial earthquake and assist in speeding up their transformation and upgrade. The summary is as follows:

1. Extension of Financial Support

(1) Extend the support for processing trade enterprises’ transformation and upgrade

In 2009, the province’s financial office will arrange a one-off subsidy of $1 billion to set up a special fund in support of the transformation and upgrade of processing trade enterprises. The fund will mainly be used for processing trade enterprises as: a support and reward for setting up platforms of research and developing innovative public service, research and development units, headquarters or regional offices in Guangdong; a support for introducing innovative technology equipment for technological reform, or purchase core technology and brand trademarks; an assistance to the enterprises’ national loan which are used for reforming craft-making equipment; a reward and support for initiating research and development and exporting in its own brands; and a reward for the enterprises which has burdened with heavier taxation from domestic sales and those which founded its own brand in domestic sales.

(2) Extend the support for distribution enterprises
Hong Kong, Macao and Taiwanese funded enterprises can apply for the province’s special fund on supporting distribution enterprises. The application procedures and criteria will be as same as the Chinese funded.

(3) Extend the support for eco-friendly enterprises   

Hong Kong, Macao and Taiwanese funded enterprises can apply for projects on energy conservation with the province’s special fund, projects on resource integration and use, energy conservation awards and recognition as clean production enterprises. The application procedures and criteria will be as same as the Chinese funded.

2. Tax Exemption and Reduction

(4) Fee waiving
Cancel and cease the collection of administrative fees on 100 items, coordinating with the remission of inspection and quarantine charge of certain items at immigration. Exempt and reduce regional fees of several items, and cancel fees of several items that are governed by individual provinces, such as sales management fees on audio-visual products. As for enterprises in the province’s industry relocation parks, no regional fees will be charged except tax items stated by the country. There is also a cessation of foreign-funded enterprises’ venue use fees, as well as allowing deferred payment on land ownership transfer for enterprises with difficulties.

(5) Tax concession 
        

    1
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For Hong Kong, Macao and Taiwanese funded enterprises providing customs declaration services, all charges and additional fees collected from their clients, upon deduction of tax items stated in the taxation policy, will be regarded as reference amount for the calculation of turnover tax.

    2
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For Hong Kong, Macao and Taiwanese funded enterprises providing technical support and technology provision services related to the transfer of technology and technology development, tax exemption or reduction of turnover tax can be applied. If the profit gained by the transfer of technology is not more than $5 million, the enterprise can enjoy a full remission of turnover tax, and half remission of turnover tax if the profit gained is more than $5 million.

    3
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In addition to the deduction based on actual amount, the research and development costs on new products, technology and crafts which do not form any invisible assets in the profit and loss statement, supper deductions of 50% of the development costs will be allowed. Development costs which has formed the invisible assets, there should be an amortisation on 150% of the invisible asset capital. Hong Kong, Macao and Taiwanese funded enterprises which are recognised as advanced and new technology enterprises will enjoy a tax concession on income tax, which the tax rate will be reduced to 15%.

    4
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In view of the difficulties for Hong Kong, Macao and Taiwanese funded enterprises in paying property tax and land use tax in cities and towns as currently stipulated, enterprises conforming to the taxation regulations can apply for a tax exemption or reduction with their regional taxation units.

    5
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In view of the difficulties for Hong Kong, Macao and Taiwanese funded enterprises in paying tax on time, enterprises conforming to the taxation regulations can request for payment deferral at their regional taxation units. The deferral period, however, should not be more than three months.

(6) Reduce burden of social insurances on enterprises
Introduce a phased-in reduction on the premium rate of unemployment insurance, basic medical insurance, work injury insurance and family planning insurance. Allow enterprises with difficulties to defer their payment on social insurance premium within a certain period. 

3. Simplification of assessment process

(7) Simplify the transformation and relocation process for processing trade enterprises
Residues and production equipment left over during an enterprise’s transformation and relocation can be handled in accordance with the procedures of “the same operation unit”. Instead of applying for “customs transfer” or exit, enterprises with residues and production equipment shall go through the discard and transfer procedures as stipulated. After transformation and relocation, the supervision period of production equipment can be continuous. Upon approval of the Customs and Excise Department, the enterprise can remain in the original customs management category.

(8) Simplify the outsourcing application process of processing trade enterprises
Encourage process outsourcing reformation throughout the province and introduce “process outsourcing management system” within shorter time while making “online approval” possible. Allow process outsourcing for processing trade enterprises which have reached a certain level of processing ability, but are unable to complete the whole production and orders due to constraints from production speciality and level of craftsmanship.

 (9) Simplify the assessment process of processing trade enterprises selling bonded goods in domestic markets
Simplify the assessment process of domestic sales, by introducing the use of “Processing Trade E-Handbook” and “Management System of Taxation on Domestic Sales”, achieving the goal of “application online and instant list”. Procedures such as categorisation, price estimation, quantity checking will be pre-processed to shorten the time needed for taxation process of domestic sales, increasing the customs operation efficiency. As for enterprises under supervision of implementing e-account book, “AA” enterprises and “A” enterprises with valid assurance, domestic sales can be processed through the “multiple processes at one declaration” within the same month, upon approval of Customs and Excise Department.

(10) Simplify the assessment process on Hong Kong and Macao’s enterprises investing in commercial and retail industry. (details not mentioned)

(11) Simplify the assessment process for enterprises investing in food, pharmaceutical and related industries
For Hong Kong, Macao and Taiwanese funded manufacturing enterprises of pharmaceutical products, medical equipment, health food and cosmetics, and the pharmaceutical departments of medical institutions, the assessment process of permit application, change or renewal will be delegated to the food and pharmaceutical product supervision units in cities and counties, to bring local assessment policy into practice. “Online Assessment and One-stop Assessment”, as well as “Green Channel” policy can also be implemented. Encourage optimisation of product structure among Hong Kong, Macao and Taiwanese funded pharmaceutical enterprises. Enterprises which need to increase and change the production venues, or change the names of the enterprises are allowed to have supplementary registrations of pharmaceutical products, to avoid redundant registration and production. Assistance in process commission policy will be given to eligible new pharmaceutical product manufacturers. There will also be support for Hong Kong, Macao and Taiwanese funded enterprises in utilising production resources in stock.

(12) Optimise the process of exchange settlement
Further optimize the application programme and features of the integrated exchange settlement assessment system, to speed up the process of exchange settlement. Besides, the limit of exchange settlement for processing exports will be increased to a reasonable level.

(13) Optimise the process of export tax rebate

With actual exported goods, or goods stored into the Custom’s special supervision areas and locations under the policy of “tax rebate upon entry”, enterprises can apply for a proof of export tax rebate at the Customs and Excise Department, the process of which can be completed within three days upon the Customs’ approval. The enterprises can then apply for tax rebate at the province’s state taxation department. The application will be processed in accordance with regulations and a schedule.

4. Support for Enterprises’ Independence and Innovation    

(14) Strengthen the establishment of innovative platform
Strengthen collaborations on technological innovation among Guangdong, Hong Kong, Macao and Taiwan. Establish high level innovative platforms through collaborations among enterprises and technological disciplines with great mutual economic relations in the above mentioned four areas. Develop international high technology parks and industrialisation stations in Guangzhou, Shenzhen, Zhuhai and Dongguan, establishing a region of technological innovation of Guangdong, Hong Kong, Macao and Taiwan.

(15) Strengthen the services on intellectual property

Adopt an applicant-friendly policy for Hong Kong, Macao and Taiwanese funded enterprises in terms of patent application. Subsidies will be given to Hong Kong, Macao and Taiwanese funded enterprises when applying for invention patents within or outside China. By applying as an advantageous enterprise, enterprise model or enterprise on strategic trial in intellectual property with provincial recognition, the Hong Kong, Macao and Taiwanese funded enterprises will be given support in joining the patent technology implementation programme. The application procedures and criteria will be as same as the Chinese funded.

(16) Encourage and support enterprises’ technological reformation

Hong Kong, Macao and Taiwanese funded enterprises planning to have a technological reformation can apply for Capital for Potential Unleashing and Reformation of the province. The application procedures and criteria will be as same as the Chinese funded.

(17) Encourage and support the technological development of enterprises    

Allow application of Hong Kong, Macao and Taiwanese funded enterprises for the recognition as the province’s research and development centres for enterprise’s technology and research centres for engineering technology. If eligible, applicants can even be recommended for applying the recognition at the country’s centres. Hong Kong, Macao and Taiwanese funded enterprises will also be allowed to apply for the recognition at the advanced and new technology enterprises, technological enterprises, or joining the innovative trial projects for enterprises. Hong Kong, Macao and Taiwanese funded processing trade enterprises will be encouraged and supported to apply for SME innovation fund, taking big projects on developing specific technology, sharable industrial technology. They can even apply for technology awards. The application procedures and criteria will be as same as the Chinese funded.

5. Reinforcement on Financial Services

(18) Provide guidance for financial corporations on extending the amount of loan, while giving credits support for the Hong Kong, Macao and Taiwanese funded enterprises that possess competitiveness, certain market share, certain amount of orders and a good credit record. Also provide guidance for financial corporations to give stronger support for the capital of the Hong Kong, Macao and Taiwanese funded enterprises which are coherent to the industries’ development and transformation directions.  


(19) Expand the popularity of direct debt financing tools

Concentrate on developing debt financing tools such as short-term commercial papers and mid-term bills. Also speed up the trial of SME’s use of short-term commercial papers and the possibility assessment of the issue of RMB bonds in Hong Kong by the Hong Kong enterprises with a wider range of businesses in China. Provide credit assurance or insurance coverage for Hong Kong, Macao and Taiwanese funded enterprises which issue short-term commercial papers or mid-term bills. The guarantee services of guarantee companies, and the credit insurance and guarantee insurance of insurance companies, in this case, can be fully utilised. The enterprises would lower their risk of financing in the bank markets while increasing the possibility of underwriting by financial corporations.

(20) Encourage innovative service approaches among financial corporations

Encourage financial corporations to adopt innovative approaches when granting credits and approving loans to Hong Kong, Macao and Taiwanese funded enterprises. The financial corporations can, for example, design a more reasonable credit period or loan payment plan based on the enterprises’ financing needs and cash flow characteristics. Invent new asset-based guarantee method while referring to Property Law etc. for new and legal guarantee method.

(21) Encourage financial corporation to develop export loan service

Export-import banks should extend the scope of credit preferential rate from exporting sales of RMB to sales of exports with their own intellectual property, brand and high added value. Financial corporations can also provide loan service for RMB export buyers.

(22) Further develop financial collaboration between Guangdong, Hong Kong and Macao.

Facilitate trial implementation of RMB trade clearing in Guangdong, Hong Kong and Macao. Under CEPA, allow Hong Kong’s and Macao’s banks to set up branches of “different places, same region” in Guangdong (mainly in Eastern Guangdong, Northern Guangdong and Western Guangdong) on a trial basis, and extend the implementation to the whole province at the right time. Provide support for setting up Hong Kong and Macao investment consultancies in Guangdong. Encourage Hong Kong’s and Macao’s private equity fund and risk (venture investment) fund to invest in Hong Kong and Macao funded enterprises in Guangdong. Encourage Hong Kong’s and Macao’s insurance companies to set up professional insurance units, specialising in insurance services for Hong Kong and Macao funded enterprises in Guangdong. Encourage Hong Kong, Macao and Taiwanese funded enterprises to move their clearing centres and profit centres to Guangdong. Also facilitate collaboration between banks in the province and banks of Hong Kong, Macao and Taiwan on providing “external guarantee and internal credits”.

6. Secure Supply of Water, Electricity And Natural Gas (details not mentioned)

7. Provision of Better Employment Service (details not mentioned)

8. Development of Better Market Environment (details not mentioned)

9. Pursuing Support from National Policies

(30) Be proactive in developing advantages. Further procure the country’s stronger support for the Hong Kong, Macao and Taiwanese funded enterprises, in terms of the development of processing trade as well as independence and innovation. The country’s stronger support in securing the supply of products, such as oil, should also be pursued. Developing stably, the enterprises will then be able to fight against the financial earthquake efficiently.

Unless otherwise specified, the above measures are applicable to all enterprises of foreign investment.