Located on the west bank of the Pearl River at its entry to the South China Sea, Zhuhai lies adjacent to Shenzhen and Hong Kong across the river to the east, and adjoins Macau over land to the south. As one of the earliest special economic zones in China, the city enjoys local legislative power granted by the National People's Congress. Zhuhai boasts a comprehensive, outward-looking economy with new- and high-tech industries as the core and supported by the coordinated development of a diverse range of services and industries such as commerce and trading, tourism, finance, real estate, information, logistics, agriculture and fishery. Backed by well-developed infrastructure facilities and sufficient power and water supplies, Zhuhai ranks among the top mainland cities in terms of coverage rate of water and power supply network, cable TV network, and broadband network. The city has won the "State Environmental Protection Model City" award for several years in a row, as well as the "International Best Practices to Improve the Living Environment" award by the United Nations Center for Human Settlement. More recently, Zhuhai was also named the "National Advanced City of Science and Technology".

Zhuhai is one of the hot spots for foreign investment. As at the end of 2002, there were 7,303 foreign direct investment (FDI) projects originating from 52 countries and regions in the city. These included over 30 renowned multinationals such as Mitsubishi, Toshiba, Canon and Panasonic of Japan, Exxon Mobil and Flextronics of the US, BP of the UK, Siemens of Germany, Carrefour of France, and Philips of the Netherlands. Zhuhai has developed trade relations with more than 140 countries and regions around the world. Recently, the city hosted the first World Economic Development Declaration Conference, fully demonstrating its vibrancy to the world.

Zhuhai is seeing a host of new opportunities as Guangdong's economic relations with Hong Kong and Macau are set to become closer under CEPA. In addition to increased cargo flow among the three places, the scope of cooperation for trade in services will also expand. According to the findings of a recent study on the transport links on the west bank of the Pearl River, the construction of highways along the coast will link Zhuhai with neighbouring cities. This, coupled with the Hong Kong-Zhuhai-Macau bridge, which is currently at the discussion stage, will form a ring-shaped transport network connecting Zhuhai with its neighbouring regions. Besides, the planned Zhuhai-Macau cross-boundary industrial zone is set to generate new opportunities for Zhuhai, Hong Kong and Macau.

Niche Industries

The information industry and electrical machinery manufacturing are the two engines of growth of Zhuhai's industrial sector where new- and high-tech industries are making up an increasingly large share. Zhuhai's top 10 industries are: electronics and communications, electrical machinery, electricity and gas, instruments and meters, textiles and garment, plastics and metals, pharmaceuticals, food and beverages, chemicals, and paper making. In recent years, the city authorities have realigned the priorities for developing five key sectors, namely electronics and communications, electrical machinery, petrochemicals, biomedicine, and software. At present, Flextronics and Canon in the electronics and communications sector, and Gree in the electrical machinery manufacturing sector, have reached a considerable scale of operation and become the pillars of Zhuhai's economy. Biomedicine and medical equipment manufacturers grew rapidly at an annual rate of 40% in 2003. Leading players include Livzon Syntpharm and United Laboratories. BP and Eternal are industry leaders in the petrochemicals industry which has also become a niche sector. Thanks to the implementation of consolidation to foster the software sector, especially following the issuance of the Several Policies on Encouraging the Development of the Software and Integrated Circuit Industries and the establishment of the national software base in Zhuhai, the output value of the software sector has been growing at an average annual 50%. About 500 software companies are currently operating in Zhuhai. The industry as a whole is developing on a fast track in a positive direction.

Zhuhai enjoys unparallelled advantages in developing services industries in the Greater PRD region. The proportion of the city's primary, secondary and tertiary industries is 3.6 : 57.3 : 39.1. Services have been expanding rapidly to make up a significant share of the economy. Leading sectors such as trading, commerce, distribution and tourism continue to surge while the real estate market is growing at a steady pace as control measures take hold. Modern services such as finance and insurance, warehousing and transportation, post and telecommunications, and logistics are also posting rapid growth. Tourism, logistics and convention and exhibition will become the development priorities of Zhuhai in future.

Investment Environment

Transportation. As one of the major coastal ports, Zhuhai has convenient and well developed transport links. The extensive highway network connects Zhuhai with any of the PRD cities within two hours' drive. Meanwhile, construction of the Guangzhou-Zhuhai railway will begin in November 2004. Upon completion of the rail link, it will only take 40 minutes to travel from Zhuhai to Guangzhou. The Zhuhai airport offers 32 domestic routes with daily flights to major mainland cities like Beijing and Shanghai.

Commercial services. Zhuhai's well developed commercial sector comprises a large number of supermarkets, department stores and western-style restaurants, including famous French retail chain Carrefour, Vanguard, Moi Department Store, Minrun Xinqixing, Jusco, McDonald's, Kentucky Fried Chicken and Pizza Hut.

Financial services. Zhuhai's financial sector has expanded into a network of more than 600 establishments. In addition to the People's Bank of China and the state-owned commercial banks, a number of foreign banks have also established a presence in the city, including Nantong Bank, Standard Chartered Bank, Bank of East Asia of Hong Kong, and Banco Nacional Ultramarino of Macau.

Human resources. Over the past three years, Zhuhai has set up 17 universities and a large number of R&D bases. The QSI International School of Zhuhai recruits students among the expatriate community in the city. The talent database currently has 1,770 entries. Nearly 2,000 tertiary institution instructors and R&D experts have taught or conducted research in the city. The Zhuhai National Hi-tech Industrial Development Zone and United Laboratories of Zhuhai have recently been approved by the Ministry of Personnel to establish post-doctorate research centres in the city.

Comprehensive economic development zones. Apart from the Xiangzhou special economic zone, there are five other special zones all of which have reached a mature stage of development and are performing specific economic functions. They are: Zhuhai National Hi-tech Industrial Development Zone, Zhuhai Bonded Zone, Wanshan Marine Development Experimental District, Hengqin Development Zone, and Zhuhai Harbour Industrial Zone. Meanwhile, foundation for the construction of the Zhuhai-Macau cross-boundary industrial zone was laid at the end of 2003 and the overall plan for the Zhuhai part is now completed. Tenders are expected to be invited soon for the construction of infrastructure facilities and construction will then officially begin. The Zhuhai National Hi-tech Industrial Development Zone has been expanding steadily to encompass the technology and industrial parks of Nanping, Sanzao, Xinqing and Baijiao, as well as the demonstration base for the commercialisation of hi-tech achievements. The development zone has also established the "University Park" to serve specific functions and develop itself into a region with unique advantages.

CEPA Implementation Measures

The administration of country of origin under CEPA comes under the jurisdiction of Customs. In view of this, Gongbei Customs has set up a country of origin office and developed nine sets of standards and procedures including online supervision; verification, analysis and monitoring of country of origin; measures for mutual assistance and liaison with Macau authorities; and measures for Gongbei and other customs authorities to verify Macau-origin goods.

At the same time, Zhuhai will organise a series of CEPA promotions such as publishing the Zhuhai CEPA Services Guide, organising CEPA related networking events, launching a CEPA website and establishing hyperlinks with relevant Hong Kong and Macau government websites, and enabling investors from Hong Kong and Macau to complete investment project advance registration online.

The Zhuhai-Macau cross-boundary industrial zone, with its foundation laying ceremony taking place on 9 December 2003, marked the start of a new era of all-rounded cooperation among Zhuhai, Hong Kong and Macau under CEPA.

To facilitate CEPA implementation, Zhuhai plans to install an automated entry-exit visitor checking system and a one-stop electronic passenger vehicle checking and clearance system at Gongbei checkpoint during the first half of 2004. When the two new systems are operational, customs clearance efficiency will be significantly improved from 40 seconds to 3 seconds per visitor, and from 1 minute to 15 seconds per vehicle.

Latest Investment Incentives

Zhuhai announced the incentives for investing in the Zhuhai-Macau cross-boundary industrial zone on 19 December 2003.

Customs supervision. The entry-exit of goods will be administered by a filing system where no tariffs or licences are required. Equipment, parts and components, building materials and reasonable quantities of office supplies for own use and fuel for production use are exempt from tariffs and import-related VAT. The new customs clearance model of "one declaration, one checking of forms and one inspection" will be applied to the import-export of goods. There will be no restriction on the ratio of domestic to export sales. Materials, parts and products imported by export processing enterprises may be sold domestically provided that tariffs and import-related VAT are duly paid.

Foreign exchange control. Both foreign currency and renminbi can be used for settlement. Enterprises may retain foreign currency as working capital. Both domestic and foreign financial and insurance institutions may set up branch operations or offices in the zone.

Inspection and quarantine. Goods imported by enterprises in the zone from Macau for producing export processing products can be exempt from quality inspection. However, if scrap material is being used as raw material, environmental protection inspection is still required in accordance with the relevant regulations. Goods leaving the Zhuhai part that are subjected to inspection can be exempt from quality inspection and food hygiene inspection provided that they do not carry the "made in China" label or China-registered trademark or China origin label, or are not required by inspection and quarantine authorities to present quality certificates.

Opportunities for Hong Kong and Macau

Due to geographic proximity and extensive personal connections, Zhuhai has long fostered close ties with Hong Kong and Macau. Business people from Hong Kong and Macau are among the longest-standing traders and investors in Zhuhai. To date, Hong Kong and Macau have remained the largest and second largest sources of FDI in the city respectively. In terms of exports, Hong Kong and Macau are Zhuhai's largest and fifth largest partners respectively. Given the new circumstances under CEPA, more opportunities for economic cooperation between Hong Kong, Zhuhai and Macau will emerge.

New bridge. The Hong Kong-Zhuhai-Macau bridge, a spur to Greater PRD economic development, is currently at the stage of discussion. Upon completion of the bridge linking the three cities, it will only take a few ten minutes to drive from Zhuhai and Macau to Hong Kong, which is more than three hours faster than the present journey via Humen bridge. The planned bridge will significantly shorten the distance between the west bank of the Pearl River and Hong Kong. The bridge therefore will play a pivotal rule in facilitating the economic development of the Greater PRD region. It will not only give an impetus to PRD development but also drive the growth of the western part of the PRD region, paving the way for the emergence of the Greater PRD economic region. The Greater PRD region will in turn extend its reach to the ASEAN free trade zone and exert its influence on other provinces such as Guangxi, Hainan, Yunnan, Guizhou and Sichuan. The region is poised to become a multifunctional, highly open and vibrant economic region in the world.

Logistics. Logistics is one of Zhuhai's development priorities. In the Zhuhai Bonded Zone and Harbour Industrial Zone, the logistics industry has made significant progress. More than 30 of the world's top 500 players and large warehousing enterprises have launched logistics operations in the Gaolan port area in the Harbour Industrial Zone. Under CEPA, freight sorting and logistics services have been further opened up for Hong Kong's participation and hence more opportunities are unfolding for Hong Kong industry players. Moreover, the planned Hong Kong-Zhuhai-Macau bridge will link up Hong Kong's land transport with the Beijing-Zhuhai highway. This will unleash tremendous opportunities for Hong Kong logistics players. Goods from Wuhan can expect to arrive in Hong Kong in one day. By taking the coastal highway, the journey from Hong Kong to Guangxi can be shortened to half a day. The reach of Hong Kong logistics players is significantly extended as a result. Experts project 30% and 35% increases in sea and air freight respectively for Hong Kong if industry players can extend their services to cover the western part of the PRD after completion of the Hong Kong-Zhuhai-Macau bridge.

Tourism. Tourism is one of Zhuhai's niche industries and a driver of the city's services sector. Similarly, in Hong Kong tourism is one of the four economic pillars. Tourism is highly developed and well managed by a sound system. Thanks to CEPA and the relaxation of visa requirements, Zhuhai's tourism market can expect to align with those of Hong Kong and Macau. There is complementarity between Zhuhai's future development direction (including leisure, resort, convention and exhibition) and that of Hong Kong and Macau. Through coordinated publicity efforts, the tourism resources of the Greater PRD region can be integrated and the image of the region encompassing Hong Kong and Zhuhai as a tourist destination can be reshaped. In May 2004, China Travel Service (Hong Kong) launched a hot spring project in Zhuhai, an indication that Zhuhai's tourism resources are attracting more Hong Kong investors.

Convention and exhibition. Thanks to the attractive natural environment, comprehensive range of supporting services and vigorous economy, Zhuhai is an ideal city for hosting conventions and exhibitions. Zhuhai places strong emphasis on the development of this industry. The attractiveness of Zhuhai is clearly illustrated by the success of the Aviation Expo held in the city. The unique features of the Zhuhai Bonded Zone are another attraction for Hong Kong exhibition organisers to stage international trade shows in Zhuhai. In Hong Kong, the convention and exhibition industry has a long history of development. Hong Kong has a wealth of experience, extensive international exposure, strong sales networks and a high degree of professionalism in the convention and exhibition field. Under CEPA, Hong Kong companies can provide convention and exhibition services in the mainland in the form of wholly-owned operations. There is an enormous scope of development for Hong Kong and Macau companies in this sector.

Entrepot trade. Upon completion of the Hong Kong-Zhuhai-Macau bridge linking up the eastern and western parts of Guangdong province, Hong Kong stands to benefit from gaining easier access to Guangdong and Yunnan and even to countries like Vietnam. In other words, the large volume of trade between China and the ASEAN free trade zone may be handled through the Hong Kong International Airport.

Commerce. To implement CEPA proactively, the Zhuhai business community has launched a number of commercial property projects such as shopping streets and shopping districts capitalising on the CEPA concept. Hong Kong and Macau suppliers can offer their goods at these venues for retail. This is another opportunity for Hong Kong and Macau business people.

Airport. The Hong Kong-Zhuhai-Macau bridge will connect the airports of Hong Kong, Shenzhen, Macau and Zhuhai. The flow of people and goods among the four airports can become better coordinated and transshipment more efficiently deployed. It will also help ease the pressure caused by the ever increasing freight volume at the Hong Kong International Airport.

Research and technology. New- and high-technology is the leading growth area of Zhuhai, posting Rmb36 billion in annual output value, or one-third of the city's total industrial output. The Zhuhai University Park and Zhuhai New- and High-Tech Development Zone have both developed rapidly to give the city a strong technology flavour. New- and high-tech firms and scientific research organisations from Hong Kong may consider setting up operations in Zhuhai.

Other Investment Hot Spots

Zhuhai-Macau cross-boundary industrial zone. The zone comprises the Zhuhai part and the Macau part. The recent foundation laying of the Macau part paved the way for CEPA implementation in Zhuhai and the launch of full-scale cooperation among Zhuhai, Hong Kong and Macau. Right now, the zone is an investment hot spot among textiles and garment enterprises. At a seminar held recently in the Zhuhai Bonded Zone, leading textiles and garment entrepreneurs from places including Hong Kong, Macau, Shenzhen and Zhuhai shared their views on the development plan of the cross-boundary industrial zone. The participants also expressed keen interest in investing in the zone. Hong Kong and Macau can capitalise on their status as independent customs territory and free port to further develop supporting services such as logistics, transit trade and product display, as well as new- and high-tech industries.

Basic engineering projects and other services projects. The markets for these two types of projects in Zhuhai are largely untapped and hence the development potential is huge. The city has confirmed the strategy of pursuing industrial expansion and urban development westward. The scope for investment is enormous for Hong Kong investors in the western part of Zhuhai.

Cost Analysis on Investment

Tax. Foreign-invested enterprises are eligible for a preferential income tax rate of 15% in addition to exemption in the first two years and reduction by half in the following three years. As for individual income tax, the taxable income threshold is Rmb1,400 a month for mainland employees and Rmb4,000 for expatriates at the rate of 5% to 4.5%. Real estate tax is calculated as follows: original value of property x (1-30%) x 1.2% (exemption for three years).

Water. Water charges are Rmb1.02 per cubic metre for residential use, and Rmb1.18 to Rmb1.45 for industrial use.

Water charges for industrial users in various new- and high-tech zones, technology parks, the bonded zone, Harbour Industrial Zone are also eligible for 20% discount from Rmb1.47 to Rmb1.18 per cubic metre. The rate for industrial users elsewhere in the city is Rmb1.45, down from Rmb1.47.

Electricity. A 20% discount on electricity charges is granted in various new- and high-tech zones, down from Rmb0.678 to Rmb0.542 per kwh for bulk industrial users, from Rmb0.781 to Rmb0.624 for non-industrial and ordinary users, and from Rmb1.01 to Rmb0.808 for commercial users.

Land. The land price in various zones and parks is Rmb60 to Rmb180 per sqm for industrial land and Rmb6 to Rmb16 for rented factory; and Rmb166 to Rmb295 for industrial land and Rmb15 to Rmb23 for rented factory in the bonded zone.