Shenzhen Qianhai Comprehensive Bonded Zone Photo: http://www.szqh.com.cn/

Qianhai, a modern service industry cooperation zone in Shenzhen in southern China’s Guangdong province, is seeking to attract more overseas investments through Hong Kong by exploring the convergence of different legal systems and cross-border legal rules.

The central government on Sunday announced the Plan for the Development of the Guangdong-Macao Intensive Cooperation Zone in Hengqin, an island directly adjacent to Macau in Zhuhai.

On Monday, it unveiled the Plan for Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone. Both plans are said to be able to facilitate the scheduled economic integration between Macau and Hong Kong and Guangdong by 2035.

The two development plans are also aimed to encourage businesses in Hong Kong and Macau to move to Hengqin and Qianhai and fill up the excess office spaces there.

The plans emerged which were seen after Guangdong launched its “emptying the cage, changing the birds” policy in 2007. This refers to a policy to reduce its reliance on labor-intensive and polluting industries such as toys, textiles and plastics manufacturing and focus on cleaner and higher-value industries, particularly advanced manufacturing and financial service sectors.

Wang Yang, then Guangdong party chief and the incumbent Chairman of the National Committee of the Chinese People’s Political Consultative Conference, announced the plan in 2007.

In late 2008, Beijing unveiled the Pearl River Delta Reform and Development Plan (2018-2020) and proposed setting up economic cooperation zones in Qianhai for Hong Kong and Hengqin for Macau.

An article written by political activist Zeng Jieming in 2008 warned that it would be difficult for Guangdong to attract high-end companies due to a lack of intellectual property right protection and a transparent system.

President Xi Jinping changed the name of the Pearl River Delta Area to Guangdong-Hong Kong-Macau Greater Bay Area in 2014.
Photo: AFP

Initially, Beijing had expected that Qianhai would become another Central within years with foreign banks, financial institutions and multinational firms moving their regional headquarters there while Hengqin would help diversify Macau’s economy from gaming to cultural and exhibition sectors.

However, businesses in Hong Kong hesitated to move to Qianhai, which uses mainland law instead of common law, while Macau remained a gaming city in the past decade.

In 2014, Chinese President Xi Jinping renamed the Pearl River Delta Area into Guangdong-Hong Kong-Macau Greater Bay Area. In 2015, Qianhai and Hengqin set up their courts and started using Hong Kong and Macau laws, respectively, to handle cross-border legal disputes. But these measures still failed to help Qianhai and Hengqin attract overseas companies. Most commercial sites there were acquired by mainland Chinese companies while prices of nearby residential sites skyrocketed.

According to Savills, office vacancy rate in Qianhai was 56% at the end of last year, compared with an overall office vacancy rate of 27.9% in Shenzhen. On Monday, Beijing announced a new reform plan for Qianhai, which will boost the area of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone by eight times from 14.92 to 120.56 square kilometers.

“Currently, about 11,500 Hong Kong-invested enterprises have registered in Qianhai, most of which are in modern service industries including financial services, modern logistics, information services, technological services and professional services. Hong Kong enterprises also formed the Hong Kong Chamber of Commerce, Qianhai, Shenzhen in 2015,” said Chief Executive Carrie Lam.

“For legal services, new regulations allowed wholly owned Hong Kong enterprises registered in Qianhai to adopt laws of Hong Kong as the applicable law in their civil and commercial contracts where there were no ‘foreign-related elements’,” she said, adding that Hong Kong solicitors and barristers would be allowed to provide legal services regarding specified civil and commercial affairs, including litigation and non-litigation matters, in the Greater Bay Area.

Qianhai will explore using Hong Kong as the place of arbitration in civil and commercial cases. Photo: HK Judiciary

According to the reform plan, an international legal service center and an international commercial dispute resolution center will be built in the Qianhai Cooperation Zone. Qianhai will explore the convergence of different legal systems and cross-border legal rules, explore and improve the mechanism of applying Hong Kong law in the zone and choosing Hong Kong as the place of arbitration to resolve civil and commercial cases.

It will also explore the establishment of a new mechanism for judicial assistance and exchanges in civil and commercial matters between the zone and Hong Kong and Macau. Hong Kong and Macau law firms will support the Qianhai Court to explore and expand the scope of foreign-related commercial cases, support Hong Kong legal experts to appear in the Qianhai Court to provide assistance in legal investigations, and protect the legitimate rights and interests of enterprises and individuals that make cross-border commercial investments. Qianhai aims to gradually become an international commercial dispute resolution center.

Innovative technology

Another highlight of the reform plan is that Qianhai will “vigorously develop new research and development institutions for cooperation between Guangdong and Hong Kong and Macau, innovate scientific and technological cooperation management systems, and promote the interconnection of innovation chains among the three places.

Qianhai will build an ecosystem of intellectual property creation, protection and use, promote institutional innovations in intellectual property rights protection assistance, financial services, and overseas risk prevention and control, and build a national copyright innovation development base.

Besides, Qianhai will actively introduce venture capital institutions, science and technology funds, and research-and-development (R&D) institutions.

For decades, most manufacturers, technology companies and scientific institutions have kept their showrooms and R&D centers in Hong Kong to protect their intellectual property rights. They’ve treated Shenzhen as a place that could transform their scientific and technological achievements into technical standards.

The assembly line at the Foxconn factory in Longhua, Shenzhen. Chinese authorities say the model of “Hong Kong develops, Shenzhen transforms” is outdated. Photo: AFP

A report published by China New Service on August 18 said that the model of “Hong Kong develops, Shenzhen transforms” had been outdated. It said a new industry cluster should be formed by combing the advantages of Hong Kong, Macau and Shenzhen in new technologies.

Lam said Qianhai attached importance to supporting young people of Hong Kong and Shenzhen to develop their careers and start new businesses, including by attracting young Hong Kong entrepreneurs to settle in the Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub.

Meanwhile, Hong Kong Science and Technology Parks Corporation on Monday signed a framework agreement with Shenzhen Innovation and Technology Zone to jointly develop a cooperation zone at the Lok Ma Chau Loop in the northern district in Hong Kong. The Hong Kong and Shenzhen governments also agreed to push forward cooperation in areas such as artificial intelligence, health care, financial technology, smart cities, Internet of Things and new energy materials.

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