Beijing to Inject RMB1.5 Bln into Zhongguancun’s Modern Service Industries

November 10, 2011 Posted by China Briefing Reading Time: 3 minutes

Nov. 10 – A massive scheme is currently being laid out to develop modern service industries in Zhongguancun – the technology hub situated in northwestern Beijing often referred to as “China’s Silicon Valley.” Following the central government’s promise to inject some RMB1.5 billion into the area’s modern service sectors within the next three to five years, Beijing’s local government recently announced the key service sectors that will likely enjoy the use of the government funds.

According to the “Management of the Pilot Supportive Fund for Modern Service Development in Zhongguancun National Independent Innovation Demonstration Zone (NIIDZ) (jingcaijingyi [2011] No.2352)” issued by the Finance Bureau of Beijing on November 2, the supportive fund – consisting of both the central government fund and Beijing’s matching local government fund – will mainly be utilized in the following service sectors:

Information technology (IT) based emerging service industries
E-commerce and modern logistics industry
Technology services
Energy-saving and environmental protection industries
Other sectors listed in the government’s annual guidelines

All the Zhongguancun NIIDZ-registered enterprises – if engaging in any of the aforementioned service sectors – can consider applying for the use of the supportive fund. The government’s actual financial support will likely go to various projects through different avenues:

Subsidies will initially be used to support public services, brand promotion, market expansion, and professional training; in principle, subsidies on each project shall not exceed the amount of RMB10 million
Private equity (PE) funds will initially be used to support emerging industries, innovation projects and financing projects; in principle, PE investment in each project shall not exceed the amount of RMB50 million
Subsidized loans will initially be used to support emerging industries and innovation projects; in principle, the subsidized interest payment for each project shall not exceed the amount of RMB10 million; in addition, every interest payment shall be made at the rate lower than (or equal to) the benchmark interest rates at banks and shall not last more than two years
Rewards will initially be used to support fast-growing projects and green projects; in principle, rewards on each project shall not exceed the amount of RMB20 million

As China’s first-ever experimental area for modern service development, Zhongguancun will likely attract an increasing number of technology-intensive service companies which desire to benefit from the region’s cluster effect. According to a report by the China High-tech Industries Herald, within the next five years, eight modern service industrial bases – specializing in areas of IT, integrated circuit, digital culture, biology, engineering, e-commerce and new energy respectively – will begin to take shape and regional modern service revenue is projected to reach RMB2.4 trillion by 2015.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. The firm specializes in assisting foreign enterprises take advantage of incentives in the country. For advice, please email info@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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