Doing Business in Shenzhen
Emerging as one of China’s most innovative and economically competitive cities, Shenzhen presents itself as a promising location for foreign investors in search of growth opportunities. While having a short history, dating back to the 1970s, the city of Shenzhen has grown from a small border town to a thriving global metropolis. Notably, the city is recognized for its focus on technology and manufacturing industries. Shenzhen was designated as China’s first special economic zone, and its trade in goods experienced an impressive growth rate of 16.2% in 2021, with similar trends forecasted in years to come.
This article highlights the reasons why Shenzhen remains one of China’s best cities for foreign investment, with emphasis on its developing economic landscape and advanced manufacturing and technology sectors.
Shenzhen’s Economic Landscape
Shenzhen has quickly grown to become one of China’s leading cities in terms of economic growth, which now sits as the third-largest city by GDP. In 2021, Shenzhen’s GDP exceeded the RMB 3 trillion mark, reflecting a remarkable 6.7% increase from the previous year. Despite challenges posed by the pandemic, Shenzhen’s economic resilience remained unwavering.
Additionally, Shenzhen holds the highest per capita GDP out of all Chinese cities, approaching RMB 173,663 in 2021. The city’s economic prowess can be attributed to the city’s diverse economic landscape. The tertiary sectors comprise close to 63% of the GDP, with manufacturing-focused enterprises making up the remaining portion.
Shenzhen has also become a hub for startups, a home base for over 11,000 high-tech enterprises. The city has emerged as a leader in China’s digital economy, with well-known technology giants, Huawei and Tencent, headquartered in the city.
With a population of over 17.6 million recorded in 2021, the city continues to attract skilled labor and businesses, and is anticipated to continue on the growth path.
In terms of infrastructure, the city boasts its own airport, multiple train stations, a robust metro system, and an industrious port, providing businesses effective support for expansionary operations.
The Advantages of Investing in Shenzhen
Shenzhen boasts remarkable infrastructure that has played a crucial role in its economic development and emergence as an attractive city for investment.
With a highly developed transport network, Shenzhen transport system features an extensive subway system, well maintained roads, and efficient public transport.
The city’s advanced telecommunications infrastructure supports high-speed internet connectivity and enables efficient communication channels, essential for modern business operations.
Furthermore, Shenzhen’s strategic location, with its proximity to Hong Kong provides major advantages for local businesses. Notably, the State Council’s announcement of the Qianhai Plan to expand and deepen reform, opening up the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone. The Qianhai Plan expands the cooperation zone to over 120 square kilometers, facilitating trade and the sharing of services.
The Hong Kong – Shenzhen border is one of the busiest border crossings globally, facilitating the move of goods, people and capital between the cities. This provides companies who are based in Shenzhen easy access to Hong Kong’s extensive international networks and benefits. Additionally, it provides easy access to Hong Kongs ports and global transport routes. Hong Kong is currently Shenzhen’s largest trading partner, with a trade value of more than 650 million between the two cities in 2022.
Additionally, the strengths of each city are complimentary to the other. While Hong Kong is well known as a financial and professional services hub, Shenzhen’s main focus is on its manufacturing and technology capabilities. With such a strong strategic alliance, Shenzhen offers itself as a thriving investment destination and provides a competitive advantage to the businesses operating in the region.
Additionally, Shenzhen boasts a highly skilled workforce, particularly in the tech sector. The city’s rapid economic development and focus on innovation has resulted in a large pool of talent that operates across multiple sectors. The city is also committed to the development of its talent pool by offering subsidies, creating training bases and service platforms that allow for development and job recommendations.
Finding skilled labor to sustain growth, research and development, and general operations is often one of the most pressing challenges in launching a startup. Given this, establishing a base in Shenzhen significantly mitigates this challenge.
Shenzhen government officials are also actively implementing policies and incentives to attract investments to the city. Notably, various tax incentives contribute to the profitability of businesses. In particular, Shenzhen’s tax rate under the Free Trade Zone agreements is a mere 16.5%, as opposed to the 30% corporate tax rate imposed nationally.
Furthermore, there is no duty tax on warehousing within Shenzhen’s Free Trade Zone. This eliminates the burden of calculating and paying import taxes, allowing owners to easily move and deliver goods to the mainland without any import tax requirements. In contrast, many other Chinese cities do not offer such benefits to business owners.
Finally, the city of Shenzhen allows for the use of various incentive and grant programs. Active businesses in the Free Trade Zone can receive bonuses and grants that encourage investment and the relaxed regulations continue to encourage enterprises to set up in the region.
Why Invest in Shenzhen?
Investing in Shenzhen provides an abundance of opportunities for establishing your own business or investing in existing enterprises. Over the past four decades, Shenzhen has gone through a remarkable transformation from a small fishing village to a thriving business hub. The city is home to numerous tech firms, in addition to the Shenzhen Stock Exchange.
Few cities can rival Shenzhen, when it comes to meeting the demands of large scale manufacturing and technology start-ups. With a robust supply chain, highly skilled labor force, favorable government policies, and strategic location, Shenzhen provides investors an ideal business environment for growth and expansion.
The city’s officials have set a list of benchmark projections for the future. By 2025, Shenzhen aims to become a world-class city for innovation, particularly in public services and sustainable industries. An emphasis has been placed on research and development initiatives in positioning the city as a global leader.
Extending to 2035, Shenzhen is forecasted to become an international leader in creativity and entrepreneurship. Shenzhen will serve as a model for other cities seeking to establish a strong base of successful startups. By 2050, Shenzhen is poised to emerge as a powerhouse for competitiveness, influence, and innovation.
With its vibrant economy, well developed infrastructure, favorable policies and more on offer, Shenzhen creates an enticing offer for companies who are looking to set up operations in China.
Shenzhen’s Thriving Technology Industry
Shenzhen is sometimes referred to as the Silicon Valley of China in the media, mainly due to its thriving ecosystem of notable technology startups and competitive environment.
With the implementation of the 14th Five-Year Plan, the city is actively in pursuit of its vision of establishing its core digital economy industries as the main driver behind its GDP and business landscape. Core digital economy industries encompass all digital products, services, and infrastructure that is dependent on data elements and digital technologies.
Technology remains at the forefront of business initiatives going into the next few years. Selecting the right location to launch or expand your business is essential to maximizing reach, facilitating growth, and achieving profitability.
Shenzhen’s Manufacturing Capabilities
In addition to the flourishing technology sector, manufacturing plays a vital role in Shenzhen’s economic landscape. The city is the home base of many growing manufacturing sectors, which include automobiles, smartphones and 3D printing. At the end of 2020, the city of Shenzhen boasted a workforce of over four million workers within manufacturing businesses.
Notably, Global companies such as Foxconn and CATL, have established a presence in Shenzhen. With continuous movement to Shenzhen from both startups and established organizations, many investors are capitalizing on the advantages the region has to offer.
Shenzhen Company Registration
Our corporate services team is able to help your company get set up in Shenzhen fast and easily. We offer complete WFOE in Shenzhen setups, branch office establishment and more.
With more than a decade of experience supporting foreign businesses in China, our team of experts at Moore – MS Advisory is able to help you navigate the investment landscape all across China and ensure your business is positioned for success.
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