Shenzhen's Foreign Trade & Investment Environment
By Klaus Koehler, Managing Director, Klako Group

Shenzhen is located in the southern coastal area of Guangdong Province, P.R. China, just north over the border from Hong Kong. As China's first special economic zone, the city has developed into a major hub for the flow of people and goods between China, particularly South China, and the rest of the world.

The City

Once a tiny and insignificant fishing village, Shenzhen is now one of the fastest growing and most dynamic regions in the world. In 1979, when the city was founded, the urban population was a mere 30,000 and had a built up area of only three square kilometers. In 1980, part of the city was designated as Special Economic Zone (SEZ). With its special economic management system, the region was able to implement flexible measures and develop significant independence in international trade activities.

Today, Shenzhen covers an area of more than 2,000 square kilometers, of which the Special Economic Zone takes up 327.5 square kilometers. The city is divided into six districts. The central four districts of Luohu, Futian, Nanshan and Yantian are located within the Special Economic Zone. Bao'an and Longgang, the lower density and more rural districts, are outside the Zone.

Luohu District is Shenzhen's financial and trade center and base for network services. Futian District, in the heart of the Special Economic Zone, is the city's center of administration, culture, information, exhibition and commerce. Shenzhen's hi-tech, higher learning and western logistics center is located in the Nanshan District. Here, the Shenzhen Hi-Tech Industrial Park was set up in order to promote scientific and technological progress as well as domestic and international cooperation of economy and technology. Yantian Port, the second-largest deep water container terminal in China, is located in Yantian District, the logistics and tourism hub of Shenzhen.

Outside the Special Economic Zone, Baoan District is a center for high-tech sector processing, modern agriculture and bio-tourism. Longgang District and its Grand Industrial Zone focus on logistics distribution and export processing.

There are three Free Trade Zones in Shenzhen: Shatoujiao Industrial Bonded Zone, Futian Industrial Bonded Zone, and Yantian Port Bonded Zone.

Population

In the past twenty years, Shenzhen's population has grown to over seven million people. Shenzhen's factories have attracted many young workers from all over the country, resulting in an average age of 26 among the city's population. More than 90% of the people living in Shenzhen were born in other parts of China and only about one-fifth of the city's residents enjoy permanent resident status. Shenzhen's long-term residents are among the most affluent consumers in the Chinese Mainland and boast the highest average educational achievement.

Infrastructure

Since the Special Economic Zone was established, Shenzhen has continuously improved its infrastructure. A modern and convenient transportation network is available with expressways, highways, and railways reaching out in all directions. Telecom networks are spread to every part of the city to provide a comprehensive coverage of local lines and cell phones. The city boasts 8 harbors, 12 cargo docks and the second largest container terminal in China. Shenzhen Bao'an international Airport is one of the four largest airports in China and an air cargo hub for the South China region.

Economy

Shenzhen is located in the Pearl River Delta, a mature economic area and the base of the Chinese manufacturing industry. The city is the mainland's leader in high technology manufacturing and is quickly emerging as a transportation and logistics center. It ranks first in exports among all cities in the Chinese Mainland, and fourth in terms of GDP. Since the mid-1990s, Shenzhen has promoted the growth of seven major industries including microelectronics and components, computers and software, IT, electro-mechanical integration, video and audio products, and key projects of light industry and energy. In addition, other industries such as medical equipment, pharmaceuticals, new materials, and biotechnology have developed rapidly.

Foreign investment has been a major source of funds for the city's economy and construction. Investors from more than 60 countries and regions have set up Representative Offices, Wholly Foreign Owned Enterprises or Joint Ventures in Shenzhen and have enjoyed preferential tax treatment. In order to benefit from the city's tremendous manufacturing and distribution capacity as well as growth potential, many multinational companies have established regional headquarters in the Shenzhen area.

Shenzhen has established multi-dimensional and multi-channel foreign trade and economic links with over 70 countries and regions in the world. At the same time, the city is vigorously promoting economic and technological cooperation with other parts of China and has been expanding economic contacts with hinterland businesses. This rapid development in domestic trade has turned Shenzhen into one of the regional commercial centers in Southern China. The city is the ninth biggest buyer among mainland cities, with a growth rate ranked third. Being the country's leader in modern retail channels, the city's traditional department stores are disappearing quickly and several large multinational retailers such as WalMart, Carrefour and Jusco have opened up in Shenzhen.

Land Use

Shenzhen's Land Use Rights are managed and transferred by agreements, bidding or auctions. The maximum length of right-transfer varies according to the purpose of use. The maximum period for housing is 70 years, for industry, hygiene, culture, education, science and technology 50 years, for commerce, tourism and entertainment 40 years, and for multiple or other uses 50 years. Land use rights can be transferred within the tenure.

Manufacturing facilities may be built by local property developers for transfer or leasing, or directly developed by the foreign investor holding the land use rights. Facilities available for rent are published twice a year by the Land Planning Bureau.

Labor and Salary

Salaries paid by foreign invested enterprises and Sino-Foreign joint ventures may not be lower than the minimum wage set by the local government. The current (2003) monthly minimum salary is 600 RMB inside the Special Economic Zone and 465 RMB for Baoan and Longgang districts outside the SEZ. The minimum wages for 2003 are effective from 1 May 2003 to 30 April 2004. Working hours must be in accordance with local regulations, which generally are 8 hours per day and 40 hours per week. The employer is expected to cover for employees' welfare payments, including pension, medical, injury, and unemployment.

If you require assistance with the above subject, please contact us at info@klako.com with your detailed questions.

All information in this report is verified to the best of our ability and is assumed to be correct at time of release; however, Klako Group does not accept responsibility for any losses arising from reliance on the information provided within.