In February 2022, Shenzhen ’ second municipal Ministry of Commerce ( MOFCOM ) released a document titled respective Measures for Accelerating the construction of an International Consumption Hub ( the “ measures ” ), which outlines 28 policy measures for developing Shenzhen ’ randomness consumption landscape .
The measures cover a wide range of policies, from expanding consumption infrastructure, such as business districts to strengthening consumer rights protection, to expanding duty-free denounce.
They besides include monetary incentives for companies and brands to set up and expand in the city, deoxyadenosine monophosphate well as mechanisms for creating a more business-friendly environment .
The measures come after China ’ south cardinal leadership emphasized the importance of domestic consumption and as the country ’ s consumers and businesses confront headwinds from an ongoing COVID-19 outbreak and global macroeconomic pressure .
At the lapp clock, longer-term local trends suggest that Shenzhen is perfectly situated to become a regional shopping destination if it can properly leverage its increasingly affluent consumer base and attract first brands and companies .
- 1 Background: Domestic demand as a driver of economic growth
- 2 Policy measures for transforming Shenzhen into a consumption hub
- 2.1 Developing retail and consumption infrastructure
- 2.2 Incentives to attract brands and companies
- 2.3 Cultivating new types of innovative commercial companies
- 2.4 Developing new consumption scenarios
- 2.5 Creating a world-renowned consumer environment
- 2.6 Creating a fertile environment for enterprise development
- 3 A city with huge long-term growth potential
Background: Domestic demand as a driver of economic growth
Consumption in 2021
2021 was a rollercoaster of a year for domestic consumption in China. The begin of the year saw a huge boom in spend, partially due to the first gear base effect from the dip in early 2020, but besides partially due to the recurrence to economic stability and an increasingly incontrovertible expectation with see to the COVID-19 pandemic. The latter half saw a significant slowdown in consumption due to a number of issues that progressed in rapid sequence – austere implosion therapy during the summer, sporadic COVID-19 outbreaks, and a baron grind in the fall .
entire retail sales for consumer goods – including spend by households, governments, and businesses – rose 12.5 percentage year-over-year in 2021, 16.4 percentage points higher than that of 2020 .
however, growth was highly uneven over the year, and had slowed to just 1.7 percentage in December, weaker than November ’ mho emergence rate of 3.9 percentage. The figure marked the slowest expansion since August 2020, suggesting weakening overall pulmonary tuberculosis .
The begin of 2022 saw a rebound in consumption. Data from the National Bureau of Statistics ( NBS ) shows total retail sales of consumer goods grew 6.7 percentage year-over-year in the blend menstruation for January and February .
however, this data is from before the most recent outbreak of COVID-19 – the worst China has experienced since 2020 – and the outbreak of the Russia-Ukraine war, which is expected to impact provision chains and international trade and put more press on the global economy. The following few months are therefore expected to see a significant drop in consumption as the country tackles the rising COVID-19 case numbers .
Boosting consumption in 2022 and beyond
The government has made boosting pulmonary tuberculosis a key economic priority in 2022. The 2022 Government Work Report ( GWR ), the most crucial economic and social policy text file to be released each year, called for the area to “ promote consumption and expand demand ”. This will be achieved partially by improving VAT exemption, credit, and refund systems, and implementing large-scale rebates on VAT in 2022 .
These include RMB 1 trillion ( US $ 157 billion ) in VAT rebates for micro and small-sized enterprises over the course of 2022. The promise may be that the small companies and self-employed will invest that money back into their businesses or spend it on other goods and services .
In accession to the country ’ second macro-level economic goals, Shenzhen besides has its own incentives to increase consumption. While the city was built largely on a boom in manufacturing – and by and by, engineering – the last ten has seen a gradual shift toward an increasingly services-led economy. In 2021, the services sector made up about 63 percentage of GDP, up from 55.7 percentage a ten earlier .
It is besides one of the wealthiest cities in the country, with an estimated GDP per head of US $ 27,000 in 2021. As a result, it has one of the highest minimum wages in the area – set at RMB 2,360 ( US $ 370.5 ) per month or RMB 22.2 ( US $ 3.5 ) per hour as of January 1, 2022. The rising costs of labor may mean the city will lose out to more competitively priced cities in China and abroad .
At the lapp time, rising living standards besides presents a new opportunity for the city .
disposable income per head reached RMB 70,847 ( US $ 11,121 ), the third-highest in China after Shanghai and Beijing. It is besides a very well-connected city, with rapid ecstasy links to other major – and affluent – cities in the GBA, such as Guangzhou, Foshan, and Hong Kong. Improving its consumption landscape to leverage not only its own inhabitants but besides attract consumers from surrounding areas, is a key means for Shenzhen to reshape its economy and secure its future over the adjacent decade .
Policy measures for transforming Shenzhen into a consumption hub
The measures lay out 28 measures for transforming Shenzhen into a major external hub for consumption. The measures span a broad rate of policies, from improving physical infrastructure to strengthening consumer rights to making the city more attractive at night. It besides rolls out several bonus policies for brands and companies to set up or develop further in Shenzhen .
many of the measures do not have a unclutter timeline and act more as general guidance for local government departments to develop more concrete policy measures and guidelines. Below we provide an overview of the measures that may be of concern to alien investors .
Developing retail and consumption infrastructure
Developing key business districts
A major separate of the design to boost Shenzhen ’ s consumption landscape is to improve and develop the consumption infrastructure. This will involve further developing major clientele districts, equally well as other commercial areas such as shopping areas, hotels, and other commercial facilities .
The drive is to create respective key commercial centers in the city ’ s diverse districts. These include :
- Futian Business District
- Houhai Super Business District
- Luohu Core Business District
- Huaqiang North Pedestrian Street
- Xiangmihu International High-end Consumption Area
- Core Business District of the Shenzhen Bay Super Headquarters Base
- Qianhai Mawan Business District
- Dalang Fashion Town
- Longhua Core Business District
- Shatoujiao Shenzhen-Hong Kong International Tourism Consumption Cooperation Zone
In addition, the measures call for supporting business district construction projects to issue substantial estate investment trusts ( REITs ) to form a pure bicycle of existing assets and new investing .
Building international commercial consumption blocks
The measures task each zone government with give voice plans for commercial outlets within their jurisdiction and to increase focus on developing one to two occupation districts. In all, the city plans to develop at least 10 business districts with pedestrian streets and “ night economic presentation blocks ” in the future five years. The municipal fiscal chest of drawers will give up to RMB 10 million ( US $ 1.7 million ) in grants to projects that meet certain acceptance standards, which the district fiscal chest of drawers will finance at a 1:1 proportion .
Incentives to attract brands and companies
Rolling out first-store and first-release incentive policies
The measures seek to attract high-end brands to set up in commercial districts through a “ first memory ” or “ first issue ” policy. This policy will support celebrated domestic and extraneous brands to set up a first storehouse, flagship store, concept stores, or other new forays into the city, and encourage them to debut modern products in Shenzhen or concurrently in Shenzhen. exchangeable policies have been rolled out in other cities, such as Beijing .
The city has besides rolled out several bonus grants to encourage brands to enter the Shenzhen market. These are :
- A reward of up to RMB 200,000 (US$31,394) for famous foreign and domestic brands that enter Shenzhen, with each company eligible to receive up to RMB 5 million (US$784,855) in rewards each year.
- An RMB 500,000 (US$78,486) award is also given to well-known brands that establish independent legal entities in Shenzhen.
The measures besides seek to attract more international commercial companies and mark operators to set up in Shenzhen and to encourage stronger cooperation between these companies and state-owned capital .
Rolling out headquarters incentive policies
The city will besides support mid-to-high-end brands of multinational companies ( MNCs ) to set up global headquarters, regional headquarters, or functional headquarter in Shenzhen. long-familiar deal and commercial enterprises that are fresh to Shenzhen and commit an investment of RMB 200 million ( US $ 31.4 million ) to projects in Shenzhen can receive a reinforce of RMB 10 million ( US $ 1.7 million ).
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Promoting auto sales and online retail
The measures call for the promotion of car sales in the city, stating the focus should be on encouraging the purchase of new energy vehicles ( NEVs ) or the replacement of old vehicles for NEVs. To do this, the measures propose optimizing the mechanism for selling or replacing second-hand cars and providing a 0.5 percentage wages for second-hand car sales. well-known domestic and foreign car brands are besides encouraged to establish headquarters in the city, as is the growth of new NEV brands, although no specific incentives for this have been revealed .
At the same meter, the measures pledge to increase accompaniment for local e-commerce platforms, encourage retail enterprises to expand e-commerce business, and further increase the scale of on-line retail .
Expanding the duty-free economy
last, the measures propose to expand the duty-free economy by supporting national policies and promoting the construction of duty-free stores in the city. To achieve this, the measures propose optimizing clearance measures, facilitating visa procedures, and improving support facilities, such as servicing centers for oversea tourists .
The city will besides strive to strengthen consumer rights through means such as optimizing “ deviation refund ” services, implementing a policy that enables immediate merchandise returns, and piloting an “ electronic tax refund ” policy. Shenzhen plans to add 200 destine shops for departure tax refunds .
Cultivating new types of innovative commercial companies
The “Shenzhen Business Excellence Plan”
The “ Shenzhen Business Excellence Plan ” seeks to support leading businesses that attract a fortune of high-end endowment, and assist companies to build leading commercial enterprise groups through mergers and acquisitions, restructurings, and cooperation .
The plan besides offers rewards for businesses in retail and cordial reception :
- A reward of RMB 500,000 (US$78,486) will be given to wholesale and retail enterprises for every RMB 100 million (US$15.7 million) increase in retail sales they see.
- A reward of RMB 50,000 (US$7,849) will be given to accommodation and catering companies with an RMB 10 million (US$1.7 million) increase in turnover.
Cultivating local brands
The measures besides seek to stimulate the growth of local brands through the “ Brand Acceleration Plan ”. The plan targets well-known local brands in industries such as consumer electronics, manner apparel, aureate jewelry, watches and glasses, newfangled “ nationally trending ” products, smasher and cosmetics, and food and beverage, among others. A reward of RMB 2 million ( US $ 313,942 ) will be given to selected brands that meet these criteria .
Fostering new retail
To promote the development of “ new retail ”, the measures propose a “ digital business growth project ”, which will support the digitalization of consumption. Through this project, digital projects can receive a subsidy of 20 percentage of the actual investment measure, capped at RMB 3 million ( US $ 470,913 ) .
The measures besides set a target of cultivating at least five raw “ retail presentation enterprises ” with tax income exceeding RMB 10 billion ( US $ 1.7 billion ) by 2025 .
Developing new consumption scenarios
Deploy new scenarios of trendy shopping and shopping
The measures besides encourage the exploitation of new advanced forms of denounce and promotion to enhance the consumption know. The proposed means for doing this include deploying technology, such as augment reality ( AR ), virtual world ( VR ), and holograms, to create an immersive and interactional shop know .
The measures besides promote the development of newly product launches, fashion shows, engineering experiences, theme parks, and other immersive consumer-focused experiences .
Create a new urban nighttime consumption scene
Another means by which the measures seek to boost consumption is by expanding the shopping opportunities into the night. The measures outline the motivation to develop “ night tours, night shopping, night entertainment, night markets, and night goods ”, among early scenarios to encourage consumers to go out more and spend in the former evenings .
To do this, the measures advocate for local governments to improve the night environment by keeping parks, squares, greenways, and other urban public service spaces receptive later at night and improve the city ’ s night aesthetics .
Creating a world-renowned consumer environment
Improving the functions of international consumer services
The measures seek to make it easier for foreign visitors to enter Shenzhen and boost consumption among alien tourists. To achieve this, the measures call for making obtaining visa easier and implementing a 144-hour visa-free passage policy for foreigners. More introduction ports will besides be encouraged to implement 24-hour customs clearance .
other measures include improving the service infrastructure for tourists, including better aesculapian services and commercial medical policy village services, tourist service centers, and standardizing the translation and habit of public signs in key public places and public facilities .
Improving consumer satisfaction
Another component to boosting consumption in the city is strengthening consumer rights. That will involve, according to the measures, the creation of newfangled laws and regulations to protect consumer rights and implementing several projects to improve product quality, and outlining the responsibilities of companies .
Among the different suggestions for achieving this goal is the constitution of a consumption evaluation index system, establishing mechanisms for monitoring consumer gratification, strengthening supervision of companies, and holding companies that violate consumer rights accountable .
Creating local shopping events
The city besides plans to create new local patronize events to boost pulmonary tuberculosis during important seasons throughout the class. These include events such as a “ Shenzhen Shopping Season ” and “ Year-end Shopping ” season .
The city will allocate special funds to support the plan and promotion of these events. These funds include :
- Up to RMB 2 million (US$313,942) for each activity by units that hold comprehensive theme activities linked to the whole city after filing.
- A subsidy of 50 percent of the investment for units that hold various sub-events after filing, capped at RMB 2 million.
Creating a fertile environment for enterprise development
The measures outline respective policies for improving the business environment in the city. One such policy is making it easier for companies in assorted consumer industries to apply for business licenses. The proposed license policies include :
- Trial implementation of the “one city, one license” policy to enable chains to apply for a city-wide license and register multiple business addresses on the same license. This would free companies from having to file multiple business licenses for their different store locations.
- Integrating food business licenses and sanitation licenses so that catering businesses can apply for just one license.
- Enable joint submission and approval of multiple licenses at once.
In addition, the measures propose mechanisms for easing restrictions on promotional and market activities to encourage them in urban public places, such as blocks, squares, and parks where conditions permit. These include :
- Optimizing approval procedures for large-scale promotional activities.
- Relaxing the management of outdoor advertisements and outdoor ad placements.
- Simplifying approval procedures for setting up outdoor advertisements and company signs.
- Allowing qualified street-level shops to carry out outdoor ad placements.
A city with huge long-term growth potential
Despite the current economic situation, the case for growing a consumer post in Shenzhen remains strong. The city has maintained positive economic increase despite the pressures of the COVID-19 pandemic and will continue to see positive growth for many years to come .
Looking beyond 2022, it makes a draw of sense for consumer brands and companies to set up in Shenzhen. apart from the monetary rewards given out by the government, there is huge emergence potential over the next decade as wages and living standards in the city proceed to rise .
In summation, the measures signal that the government is cook to create an increasingly brand and business-friendly environment, with beneficial policies, such as simplify license arrangements, making it easier for companies to expand within the city.
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extraneous companies and brands that are concerned in entering the Shenzhen marketplace can contact our local team at Shenzhen@dezshira.com for aid .