China with the aim of boosting the use of its currency at the international level and establishing better links with Hong Kong have unveiled several financial and tax measures on Friday. They are planning to develop an experimental and financial business zone in the booming southern town of Shenzhen. China is offering a 15% profitable tax rate in the corporate sector for selecting firms in the zone of Qianhai. The target is to develop on this reclaimed land in the western part of Shenzhen that allows cross border loans in the district. Qianhai is also supposed to be the experimental zone for the ever developing offshore market of Yuan.
The Evolution of the Idea
This news of this idea was declared at a news conference by the National Development and Reform Commission of China at the eve of the completion of the 15th year of the return of the former British Colony to the country of China. This declared plan enlists the city of Shenzhen that is supposedly the primary site of the market economy reforms of China. It was this town that nearly about thirty years ago laid the foundation for the rise of China to a position that it actually is now as the second largest economy in the worldwide global market. It helped in driving a wave of new and advanced financial reforms that were targeted towards reinvigorating the growth and development of the country.
Setback to the Market of China
The factory sector of China shrank once again in the month of June, this being the eighth time in a row as per the reports of the survey based on preliminary manufacturing by HSBC. The economic growth target of Premier Wen Jiabao in the year 2012 that is 7.5%, if fulfilled will be an all time lowest since the year 1990. The China hopes that their currency, Yuan will someday attain a worldwide global status that would be similar as the dollar. They aim that by the year 2020 they will be able to develop Shanghai into an economic hub that will be at par with giants like London and New York. But the road to the attainment of this goal is considered to be a long one due to the requirement of the full convertibility of Yuan in order to cross freely across the borders. This step is an absolute prerequisite in order to attain a worldwide financial greatness.
What is the Plan?
The plan for the unveiling of the tax and financial incentives include the offering of support to the companies in Macau and Hong Kong so that they are able to operate telecom firms that are wholly owned in the city of Qianhai. This plan will pave the way for the operators like PCCW and Hutchison Whampoa to provide their services in the mainland of China. This plan that was announced on Friday will also allow the firms that are eligible in the area of Qianhai to attain a corporate tax rate of 15% apart from issuing Yuan bonds with Hong Kong. The plan has also facilitated the investors of Hong Kong to open private hospitals and international schools in Qianhai.