April 2005

Introduction

Ningbo, located in the middle of China's coastline and in the south of the Yangtze River Delta, is one of China's coastal cities opened to the outside world. It is divided from Shanghai by the Hangzhou Bay. With an area of 9,365 square kilometers and a population of 5.3 million people, Ningbo enjoys a privileged right of economic management at a provincial level, which gives a great impetus to its economic prosperity. In ancient times, Ningbo was the starting point of "the silk road". Now Ningbo has grown into one of the four international deepwater harbors in China, which can berth 300,000-tonnage vessels. Ningbo has remained to be a main harbor of foreign trade ever since ancient times. It has now opened the nation-level economic and technological development zone, Ningbo tax-free zone and Daxie development zone.

While Ningbo boasts its advanced transportation and communication facilities, it is also well known for its social stability and developed science and technologies. Ningbo has gradually broadened its relations with other countries. More than 300,000 overseas Chinese who were born in Ningbo now are dedicated to making contributions to their hometown. Ningbo now has set its goal to become one of the most modern harbors in China.

Key Industries in Ningbo

There are three main industries in Ningbo, divided into further sub-divisions.

1. Industry based on the Ningbo Port - Petrochemicals, Papermaking, Power Supply, Steel Works and Automobiles
   
   This accounts for 20% of the industries in Ningbo. According to the plan, the port-based industrial production value will surpass RMB 200 million by the year 2007, accounting for 25% of the total industrial production value.
   
   
2. High and New Technology Industry - Electronic Information, New Material and Ocean Biomedicine.
   
   255 kinds of high and new technology products are made by over 700 enterprises. It is the aim of the Ningbo government that this industry will account for 35% of that of all the industries in Ningbo by the year of 2007.
   
   
3. Traditional Industries - Textile and Garment, Home Electrical Appliance, Power Distribution & Transmission, Plastic Jetting Machine, Mould Making ,Steel and Motor parts
   
   Ningbo is regarded as one of the birthplaces of Chinese modern industry. At present, there are all together 2000 garment enterprises. The production of clothes in Ningbo accounts for 12% of that in China.

Infrastructure

Ningbo is a major deepwater port city. It is reachable via expressway (four hours) or via plane (a 30 minute trip) from Shanghai. It is also easily accessible from the Provincial capital of Hangzhou. A hovercraft service also runs between Ningbo & Shanghai, (one hour). It is planned that with the upgrading of the expressway (a 54km bridge, the longest in the world, between Shanghai and Ningbo), it will be a 90 minute intercity drive, when it is finished in 2006. Ningbo has developed well over the past few years and now has a significant amount of infrastructure to boast - including excellent port facilities, a good free trade zone and speedy import-export processes. All this makes the city an increasingly attractive option when considering the expense of Shanghai, especially in the manufacturing area. It really is developing as a true Shanghai satellite.

Ningbo's main role as a Port is to break down larger cargoes brought in on bulk or giant containers for transshipment onto smaller vessels which will in turn carry the cargo onto the smaller ports and up the Yangtze River through Shanghai or elsewhere along the east coast. As a result Ningbo is of significance in the future strategic importance and is developing quickly into this new role.

Industrial Parks and their Preferential Policies for Foreign Investors

There are four national development zones and they are the main investment areas of Ningbo. The four development zones cover 60 sqkm. These four zones are based near the deep-water ports of Beilun and Daxie. By the end of 2004, they had introduced more than 2000 foreign companies with a total investment of USD $14 billion and nearly 10,000 domestic companies with a total investment of RMB 50 billion.

Ningbo Economic and Technical Development Zone

1. Foreign-funded manufacturing enterprises can enjoy a 15% tax rate for income tax. Those who will be in operation for 10 years can be exempted from income tax in the first two profit-making years and a 50% reduction in the third, fourth and fifth profit making years;
   
   
2. Export-oriented enterprises who export 70% of their total products can enjoy a 10% rate for income tax. Enterprises engaged in high-tech products can enjoy 10% rate for income tax for another three years after the end of the income tax exemption.
   
   
3. Foreign-funded enterprises, from the profit-making year, can be exempted from local income tax for five years and the high-tech enterprises can be exempted from income tax for eight years.
4. Foreign businessmen can be exempted from paying the income tax of the dividends they deserve when they remit them to other countries. If they reinvest the profits to their own enterprises in the zone or to other enterprises in the zone and if these enterprises will be in operation for over five years, they are to be given back 40% of the income tax they have paid for the reinvested part.

Ningbo Free Trade Zone

1. Taxes are exempted for those enterprises in the zone who import equipment, office facilities, production fuel and machines for their own use;
   
   
2. Except for the products prohibited by the Chinese government, enterprises in the zone can import and export without applying for import and export licenses and are exempted from customs duty and the value-added tax (VAT) emerging in exporting.
   
   
3. Manufacturing enterprises in the zone can be exempted from the VAT in course of manufacturing;
   
   
4. Enterprises in the zone can make use of their advanced equipment and technologies to process goods at the request of those enterprises outside the zone.
   
   
5. Goods imported from abroad are exempted from tax and they can be sold on domestic market.
   
   
6. Enterprises in the zone may enjoy a 15% income tax rate. Manufacturing enterprises can be exempt from tax for the first two profit-making years and may enjoy a 50% reduction for the third, fourth and fifth years.

Ningbo Export Processing Zone

1. Taxes are exempted for those enterprises in the zone who import equipment, office facilities, production fuel and machines for their own use;
   
   
2. Goods sent into the zone from domestic China shall enjoy the refunding of VAT. Raw materials, equipment, spare parts, wrappings, reasonable amount of building materials and VAT resulting from consumption can be refunded.
   
   
3. Raw materials, spare parts, wrap page, and consumables for the purpose of export processing that are submitted into the zone are bonded.
   
   
4. Re-exports are exempted from customs duties. Zone-zone transfer is exempt.
   
   
5. Corporate income tax: tax rate for foreign-funded manufacturing companies is 15%. As for enterprises with operation period exceeding 10 years, starting from the first profit-making year, 0% tax payment for the first 2 years and 50% tax relief for the subsequent 3 years are applicable. After the tax holidays, hi-tech and export-oriented enterprises can continue to enjoy the related tax rebate.
   
   
6. Export-processing are exempted from VAT.

Ningbo Daxie Development Zone

1. Foreign enterprises in the zone may enjoy a 15% income tax rate. For those comes which will be in operation for ten years, may be exempted from income tax in the first two profit-making years and may enjoy a 50% reduction of income tax in the third, fourth and fifth years. For enterprises engaged in 100% export, they only have to pay a 10% income tax rate if the export volume accounts for 70% of the whole production value.
   
   
2. The profits foreign investors get from the foreign-funded enterprises in the zone are exempted from income tax. Incomes taxes for the dividend, bonus, interest, and other incomes that foreign businessmen get relevantly can be levied at the rate of 10%. Those who have offered advanced technologies, fund and equipment on privileged basis are to be given more tax reduction.
3. Foreign enterprises in the zone, upon approval, can be given back 40% of the income tax they have paid for the reinvestment if they reinvest the profits in their own enterprises or other enterprises in the zone and if they will be in operation for five years. Those which reinvest the profits to high-tech enterprises or export-oriented enterprises can be given back all the income tax they have paid for the reinvestment.

Key Industrial Zones and Parks

Ningbo is conforming and promoting a group of key industrial zones and parks. There are ten such zones and parks based in Ningbo. Each one emphasizes on a certain industry.

Key industrial zones and parks based on Industry Orientation include?

Ningbo Hi-Tech Park( First high and new technology zone in Zhejiang Province): Focuses on the development of electronic information, high and new technology such as IC and IT. It aims at constructing a new modern and ecological science and technology city with the functions of research, development and technical innovation.

Ningbo Chemical Industrial Zone: Focuses on the development of the petrochemical industry led by oil refining and ethane, synthesized materials, macromolecule and refining chemistry industries.

Ningbo Machinery and Electronics Industrial Park: Focuses on hi-tech machinery and electronics industries containing high science and technology, large added value, but with no pollution, such as electronic, mechanical and light industries.

Ningbo Veken Industrial Park: Focuses on the development of household textile, top grade outside material and knitting industries, new environment-protective batteries industry and other relevant high-tech industries.

Key featured parks and zones oriented by the Local functions:

Yinzhou Industrial Zone: Focuses on the development of the industries of precision machinery, electronic information and jewelry processing.

Ningbo Wangchun Industrial Zone: Focuses on the development of the industries of electronic information, new materials, mechanical automobile parts, medical instruments, textile and garment.

Ningbo Minzhou Industrial Zone: Focuses on the introduction of domestic and foreign invested projects and hi-tech projects

Zhenhai Economic Development Zone: Focuses on precision machinery, electronic information, storage and logistics and refining chemicals.

Jiangbei Investment Pioneering Park: Focuses on the hi-tech industries of fine mechanics, electronic information, environmental protection and new materials.

Jiangbei Industrial Zone: Focuses on the development of machinery, metal materials, garments, high and new technological products and electronic industries.

The establishment of these various industrial zones and parks offers many preferential policies to both domestic and foreign companies. They offer a variety of services which cater to each industry at all levels.

Future Prospects of Ningbo

The further expansion of the Ningbo Port - By 2010, the annual cargo throughput of Ningbo Port will reach an estimated 250 million tonnes, becoming one of the top three ports in the world. The port will become an important part of the Shanghai International Shipping Center.

Infrastructure Projects - Based on the Hu-Hang-Yong Expressway and Yong-Tai-Wen Expressway, an expressway system of "One Circle, Five Spokes" is to be built and improved with the emphasis on the construction of the Ningbo-Hangzhou Bay Bridge, Yong-Jin Expressway, Yong-Tai-Wen Railway, project of the Zhoushan- Expressway and the City-Circling Expressway.

Energy Projects - The power plants under construction now can provide a generation capacity of more than 5million KW with the plan of 10 million KW. A number of key energy projects, such as Phase One - 5 million tonnes of State Crude Oil Storage Base, Hu-Yong-Ning crude oil transportation pipes, East Sea Oil and Gas Field and the application of natural gas, are all under construction. After the completion of these projects, a more abundant energy resource will be supplied to eastern China.

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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.