Guangzhou is China’s third-largest city and the provincial capital of Guangdong Province. As the key port of the Pearl River Delta, it is one of China’s primary import/export locations and within close range of Hong Kong Special Administrative Region, with which its economy is closely tied.
The American Consulate in Guangzhou is the U.S.’s oldest diplomatic post in China, dating back to the presidency of George Washington. It was the first city in China to benefit from the economic reforms initiated by Deng Xiaoping in the late 1970s and, largely because of this, now serves as a global hub for business in China.
Guangzhou’s total GDP in 2014 was RMB1.67 trillion (US$271.84 billion), while the city’s per capita GDP stood at RMB111.333 (US$18,123). In H1 2015, foreign trade in Guangzhou was valued at RMB624.17 billion (US$97.69 billion), with exports of RMB378.57 billion (US$59.27 billion) and imports of RMB245.6 billion (US$38.42 billion).
Key Industries
Automobiles
Automobiles are Guangzhou’s fastest-growing industry, accounting for one-quarter of its GDP. The city has specialized auto parks for domestic and foreign auto part manufacturers in Nansha, Huadu, Baiyun, and Huangpu districts. In 2013, Guangzhou’s automobile production grew to 1.81 million units, which accounted for 8.2 percent of China’s total automobile production. In 2014, production of automobiles rose by 9.3 percent compared to the previous year.
Guangzhou’s expanding automobile industry also encourages the local development of auxiliary industries like molds, chemical engineering, electronics, instruments, and tires. These industries are currently highly fragmented across China, consisting primarily of small companies that produce either a single part, or component of a part, while more complex parts are often imported. U.S. companies can take advantage of this industry to export both expertise and complex auto parts to Guangzhou.
Analysts predict that China’s relaxation of the one child policy will lead to increased consumer demand for larger passenger vehicles. While such vehicles currently only account for 10 percent of passenger car sales in China, sales are growing at a faster pace than the auto market as a whole. U.S. companies that manufacture large vehicles, such as mini-vans, may find opportunities in this area.
Petrochemicals
Guangzhou’s petrochemical industry has reached an oil refining capacity of 13.2 million tons. According to 2013 data, the total output of the petrochemical industry was valued at RMB254.163 billion (approx. US $39.5 billion) and accounted for 14.68 percent of Guangzhou’s total industrial output.
In 2013, the export and import volume of chemical products in Guangzhou grew by US$4.24 billion and US$8.398 billion respectively, which shows a growing demand for foreign imports. The city’s most prominent trade partners are the U.S., Japan, South Korea, Hong Kong, Taiwan, and Thailand. Analysts predict that cooperation in the areas of crude trade and clean energy technologies is likely to grow, especially amid mounting pressure against air pollution in China. U.S.-based companies with technical expertise in the crude trade and clean energy may therefore find a growing market for their products in the Guangzhou area as the local industry grows and diversifies.
The local petrochemical industry is experiencing growth partly as a result of incentive schemes from the Chinese government such as spot transaction, forward transaction, and several flexible trading patterns, and partly due to the availability of chain services like warehousing, logistics, trading, and information technology. As this local industry continues to grow as a result of government incentives and private initiatives, U.S.-based businesses will find a stable market for their products.
Electronics
Electronics is the third pillar of industry in Guangzhou, with the Guangzhou Science City acting as its core base. Huadu District, Nansha District, Panyu District, Conghua City and Zengcheng City are the supporting areas. Guangzhou has been identified as the National Electronic Information Industry Base and National Innovation Pilot City by the state authorities.
The electronics industry in Guangzhou consists of flat panel displays, digital home appliances, computers and computer peripherals, photo-electronic devices, communication terminal equipment, mobile telecommunication terminal equipment, home audio-visual equipment, and integrated circuits. Many of these products require components that are not readily produced in China, creating an opportunity for U.S.-based electronics and semiconductor producers that would like to sell into the market.
Guangzhou’s Growing Consumer Market
Although more widely known as a manufacturing base, Guangzhou is increasingly being recognized for its growing amount of domestic consumption. From 2012, total retail sales in the city increased by 28.8 percent and reached RMB 769.785 billion (approx. US$ 119 billion) in 2014. Growth in retail sales is largely being fueled by Guangzhou’s large population and high wages, as well as its efficient infrastructure. As the city’s affluent middle class continues to grow, more opportunities will arise for U.S. companies to export high-quality consumer goods to the city.
Guangdong Free Trade Zone- Nansha New Area
Guangzhou Nansha New Area, Shenzhen Qianhai Development Zone, and Zhuhai Hengqin New Area together form the Guangdong Free Trade Zone (FTZ). Nansha New Area is poised to be Guangzhou’s main sea-based trade hub, linking it to many locations around the Pearl River Delta. It comprises 60 square kilometers and contains seven clusters.
Shipping and cargo are expedited in Nansha New Area, with all incoming cargo inspected in a specific area. This reduces time by at least 50 percent over non-FTZ areas by enabling formalities to commence before the ship docks at the port, rather than starting once docked, as is required outside the FTZ. Twenty-four-hour service is provided and automated to ensure all processing is done swiftly.
GDP of Nansha surpassed RMB100 billion in 2014, and its industrial output reached RMB270.6 billion in the same year. Restrictions are lifted for setting up operations in the area, and there is no minimum set for registered capital.
To facilitate people who want to invest and set up business in Guangzhou, here is an introduction of Types of business presence in China:
Before starting up a business in China, you have to know what are the options. Foreign Investors generally establish a business presence in China in one of five modes: Wholly Foreign Owned Enterprise(WFOE); Representative Office; Foreign Invested Partnership Enterprises (FIPE); Joint Venture and Hong Kong Holding Company.
Wholly Foreign OwnedEnterprise (WFOE) is a Limited liability company wholly owned by the foreign investor. WFOE requires no registered capital and it's liability of equity , can generate income, pay tax in China and it's profit could be repatriate back to investor's home country. Any enterprise in China which is 100 percent owned by a foreign company or companies can be called as WFOE.
Representative Office (RO) is aLiaison Office of it's parent company. It requires no registered capital. It's activities would be: product or service promotion, market research of it's parent company's business, Quality Control liaison office etc in China. RO generally is prohibited to generate any revenue nor generating contracts with local businesses in China.
Joint Venture (JV) is a Limitedliability company formed between Chinese investor and Foreign investor. The parties agree to create a entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. JV usually been used by foreign investor to engage the so called restricted in areas such like: Education, Mining, Hospital etc.
Since March 1, 2010: Measures ofEstablishment of Foreign Invested Partnership Enterprises (FIPE) in China is taking effect. The regulation, which take effect since March 1, 2010, are known as the Administrative Measures for the Establishment of Partnership Enterprise in China by Foreign Enterprises or Individuals. There's no required minimum registered capital for a Foreign Invested Partnership Enterprise (FIPE) in Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and rest cities of China
Hong Kong Company usually been used as a Special Purpose vehicle (SPV) to invest Mainland China. Hong Kong is one of the quickest locations to Incorporate a business. Although a HK company is not a legal entity in Mainland China (Mainland China and Hong Kong, See Wiki 1 country, 2 systems), lots foreign investors, especially investors from Europe and North America still chose to setting up a Hong Kong company as SPV to invest China.
After China's entry to WTO, most industries in China welcome foreign investment, WFOE setting up in Chinabecomes the first option of foreign investment's entity structures instead of Rep. Office setting up in China. At the mean time, for tax purpose, effective licensing system etc more and more investors use Hong Kong as the holding company to invest China mainland, using this offshore company to hold their operations in China.
Business set-up in Guangzhou is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls . Tommy China Business Consulting has direct connections in the local government
Since 2006, TCBC has been focusing on consulting services for our clients to invest in Guangzhou China. We are specialized in establishment of wholly foreign owned enterprises (WFOEs), setting up of offshore companies, trading services, tax minimization, Assist in obtaining government approvals and certificates for running business, negotiate and draft various legal documents provide legal advice, negotiate government officer for Land acquisition. Advising on formation of WOFE and business structures, managing and controlling WOFE in Guangzhou China, drafting privacy policies and structuring commercial transactions
TCBC will manage all aspects of incorporation to get you a business license in Guangzhou China. We offer a range of company formation services including helping you to set up:
-Wholly Foreign Owned Enterprises (WFOE )
-Joint Ventures (Equity/Co-operative)
-Foreign Invested Partnership Enterprises (FIPE)
Contact Tom Lee for business set up in Guangzhou now.
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