Highlights
In this article, Alvarez & Marsal (A&M) has communicated with the Enterprise Service Center of the People's Government of Hongqiao to understand its current investment environment. We noted that Hongqiao has been developing a mature commercial and industrial system in four sectors: premium commerce, R&D and innovation, culture and creativity, and finance. Hongqiao is continuously providing various support policies to enhance the quality of industrial cluster development.
The A&M China Investment Observation Series aims to present to worldwide readers the continuous efforts of Chinese local government investment departments in attracting investments and serving enterprises. The series aims to reflect the authentic business environment in China from a professional service agency's perspective.
With years of experience in analyzing and researching local investment incentive policies, A&M is committed to assisting enterprises in researching and matching appropriate local incentive policies, facilitating negotiations with local investment promotion bureaus, and providing one-stop financial, tax, strategic and operational consulting services along the path of business developments.
The Heart of China's Economic Hub
In today's increasingly competitive market environment, selecting a suitable investment location is a crucial strategic decision for companies. From streamlined administrative processes to robust policy support systems, a high-quality business environment and administrative service system can safeguard and guide a company's development. Nowadays, many local governments in China adhere to an open and inclusive investment mindset, actively creating an outstanding business environment to provide more development opportunities for various enterprises.
Hongqiao is located in the heart of China's economic hub, Shanghai. It lies adjacent to the other central districts of Xuhui and Changning, and is only a 15-minute drive from Shanghai Hongqiao International Airport and Shanghai Hongqiao Railway Station. This location makes both commuting within the city and traveling cross-city particularly convenient.
Source: China Ministry of Natural Resources
In recent years, Hongqiao has gradually formed an industrial pattern dominated by the modern service industry and has vigorously promoted the advanced manufacturing industry. Hongqiao offers particular advantages in four major industries: premium commerce, R&D and innovation, culture and creativity, and finance. In 2023, 3,044 domestic enterprises and 125 foreign-owned enterprises were newly set up in Hongqiao. Hongqiao currently has two Fortune 500 companies, seven regional headquarters of multinational enterprises, six foreign R&D centers, 10 domestic companies' headquarters, eight listed companies, and 2,211 foreign-owned enterprises. In this article, we will introduce Hongqiao's commercial and industrial patten, support policy and business environment in detail.
1. Commercial and Industrial Pattern
In 2023, the service industry accounted for over 75 percent of Hongqiao's economy, with its industrial clusters principally concentrated in the following four sectors:
R&D and Innovation
Relying on core industrial parks such as Caohejing Hi-Tech Park, Zhugu Park and Hongqiao Industrial Park, Hongqiao's R&D and innovation industry focuses on fields such as technological information, software communications, life and health, green energy, and high-end equipment and materials. This focus shows Hongqiao's ambition to promote the development of high-end manufacturing and services. Constructed on 630,666 square meters of land with a total building area of 1.074 million square meters, Caohejing Hi-Tech Park is the largest R&D and innovation industrial park in Hongqiao.
Representative Enterprises: Estée Lauder R&D Center, Signify (Philips Lighting Company), Solidigm (Hynix NAND Product Solutions Company), LifeScan (formerly Johnson & Johnson Blood Glucose Monitoring Division), SoftBank Robotics, NIO.
Finance
Hongqiao leverages the eastern "Hongqiao Venture Capital Harbor" (located in eastern Hongqiao) to develop fintech, industrial investment, asset management, green finance, and related professional services. The Hongqiao Venture Capital Harbor gathered over 70 investment institutions and over 174 enterprises, earning itself the honorary title of the "Second Best National Financial Town." As of 2023, the registered fund reached Rmb45.6 billion, and the total estimate managed fund capital exceeded Rmb200 billion.
Representative Enterprises: Detong Capital, Summitview Capital, Vision Knight Capital, Hony Capital, etc.
Culture and Creativity
The cultural and creative industry centers around the northern cultural and creative industry cluster space of Hongqiao, focusing on sectors including designing, advertising media, publishing, animation and e-sports, performing arts entertainment, and fashion design. According to government information, the culture and creativity industry generated an incremental Rmb5 billion output in 2023, an increase of 60 percent year-on-year.
Representative Enterprises: Lilith Games (International game developers, featuring Rise of Kingdoms, AFK Arena, and Abi), Toys "R" Us, Kmind Strategic Consulting, Moonton Technology, etc.
Premium Commerce
Wuzhong Road, which is a main avenue located in the west of Hongqiao, is the principal carrier for premium commerce. Hongqiao's commercial industry covers an area of 1.3 million square meters, comprising sectors such as food and beverages, premium apparel, daily goods, fashion home furnishings, industrial supplies, and supply chain logistics. According to government information, the total commodity sales in 2023 were Rmb131.3 billion, showing a year-on-year increase of 1.5 percent.
Representative Enterprises: Fung Group (Hong Kong Supply Chain Management Company), Master Kong, Bright Food, Want Want Group (Taiwan Food Company), Lawson (Japanese Convenience Store), ICICLE (Shanghai Luxury Cloth Brand), Shanghai Home Expo, etc.
2. Support Policies
The government of Hongqiao promotes the economic support policies on the municipal-, district- and town-levels.
Depending on their specific needs and situations, enterprises can apply for corresponding support policies through the Hongqiao Investment Promotion Department. Below are some highlights of key support policies for 2023.
Industry Policies
For Modern Service Industries:
- Encourage foreign investors to increase investment in Hongqiao at a subsidy up to RMB10 million, i.e., 1 percent of the actual investment amount if the additional investments brings in paid-in capital exceeding USD10 million.
- Support enterprises that are in line with the development orientation of the service industry with rental subsidies and renovation subsidies up to Rmb10 million.
- Support service industries such as technological services and professional services to facilitate industrial upgrade; support the development of professional services; and support top brands by providing targeted subsidies.
For Advanced Manufacturing Industries:
- Support technology centers, innovation centers and foreign-invested R&D institutions with a one-off reward up to Rmb5 million.
- Support projects which utilize advanced technology and have entered the phase of mass production with a one-off reward up to Rmb10 million.
In addition, there are support policies for new-generation information technology industries and culture and creativity industries recognized by the government at the district-level and above, in addition to the town-level subsidies.
Regional Headquarters Policies
- Encouraging regional headquarters to settle in Shanghai is a key municipal-level investment promotion policy, and Hongqiao can offer additional rewards for regional headquarters that meet municipal-level certified requirements.
- Hongqiao provides financial support for newly established or newly certified headquarters. For multinational company headquarters, the reward can be up to Rmb6 million.
Pan-Zhangjiang Support Policies
- Certain areas in Hongqiao are enclaves of the Zhangjiang National Independent Innovation Demonstration Zone, and, therefore, enterprises in those specific areas can also enjoy additional support such as funding, land, talent and R&D.
- Funding covers support for the transformation and industrialization of R&D projects, cross-border cooperation, enterprise incubation, qualified financing activities and intellectual property, etc.
Supporting Outward Economic Development
- Hongqiao, under the leadership of the Minhang District government, has been actively assisting enterprises to develop foreign markets and enhance their international competitiveness. Hongqiao supports cross-border e-commerce business at a reward up to Rmb1 million for scaling up, as well as a subsidy of up to Rmb1 million for renting (building) warehouses outside China. It also supports enterprises to participate in overseas exhibitions by reimbursing the exhibition fees.
3. Business Environment
As an important channel between Shanghai and the world, Hongqiao consistently optimizes its business environment by building and maintaining an efficient administrative system while ensuring sufficient support for residents' well-being. In recent years, local governments across China are making continuous transformational efforts to attract investments through cutting administrative costs. Moreover, living environments in the town are continuously improved to attract talent.
Hongqiao government fully embraces the role shifting to a service-oriented government, actively fulfilling enterprises' various administrative demands and striving to reduce administrative costs for enterprises. Hongqiao's government provides guidance and consultation on government and investment policies, financial services, legal and arbitration, construction application, and talent services.
In daily administration, Hongqiao government promotes electronic governance for administrative matters, continuously expanding the coverage and improving the efficiency of the online government service platform. For key areas and high-frequency matters closely related to enterprises, Hongqiao continues to simplify the administrative process to minimalize waste of enterprise resources in obtaining government approvals and certificates.
Hongqiao government continually enhances the quality of life for its residents with excellent housing, education, medical services, and sports and leisure facilities. Within a 5-kilometer radius of Hongqiao, there are seven international schools, covering all age groups from kindergarten to high school and satisfying the educational needs of expatriates' children. Additionally, Hongqiao boasts abundant and exceptional medical resources, with multiple top-tier hospitals for residents and private general medical institutions for international personnel. Hongqiao also has 22 types of sport facilities spreading across 350 sports location points, including football fields, tennis courts, swimming pools, gyms and park trails, ensuring there is at least one sports site within a 15-minute walk from any location.
Alvarez & Marsal Comments and Capabilities
As an important gateway for Shanghai's global connections, Hongqiao possesses an excellent geographical location and has effectively pushed for the formation and development of industrial clusters within the area. Enterprises may further explore their growth potential by combining their strategic positioning and business needs with the destination's industrial policies and the existing industrial clusters.
With years of experience in analyzing and researching local investment incentive policies, A&M is committed to assisting enterprises in researching and matching appropriate local incentive policies, facilitating negotiations with local investment promotion bureaus, and providing one-stop financial, tax, strategic and operational consulting services along the path of business developments.
Originally published by 25 June, 2024
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