China Regional Focus: Dalian, Liaoning Province

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By Rainy Yao

Dalian: The Pearl of Northern China

As the biggest free trade port in Northern China, Dalian is a modernized international shipping metropolis serving as a gateway to Beijing and Tianjin. In this article, Rainy Yao from Dezan Shira & Associates takes a look at this national garden city with abundant commercial opportunities.

Economic Overview

As the core city in the Liaoning coastal economic belt, Dalian has made full use of its geographic advantages, leading the economic development of that region.

In 2013, Dalian’s GDP exceeded RMB 765.08 billion and grew at an annual rate of nine percent. The city’s primary industry contributed RMB 47.76 billion (4.8 percent growth) and its secondary industry RMB 389.2 billion (9.4 percent growth). The remaining RMB 328.12 billion came from the service sector, which grew 9.1 percent annually. Financial industry made a large contribution to the service sector. By the end of 2013, 639 finance institutions have been set up in the city.

The industrial sector plays a vital role in the city’s rapid economic growth; the city’s gross industrial output reached RMB 343.86 billion (10 percent growth) in 2013. As an industrial base of China, Dalian is a major player in almost all categories of industries, e.g.:

  • Shipbuilding
  • Machinery manufacturing
  • Petroleum refining
  • Biological engineering
  • Digitalized technology

Known as the “National Garden City”, Dalian is also one of the most popular tourist destinations in China. Tourism brought in close to RMB 90.08 billion in 2013 with over 53.3 million domestic and foreign visitors.

Development Zones

Dalian’s main development zones include:

  • Dalian Economic and Technological Development Area

Dalian Development Area (DDA), located in Jinzhou District, Dalian, is a state-level economic and technological development area approved by the government in 1984. With a solid industrial foundation and a comprehensive supply chain, the DDA has attracted more than 2,300 FIEs as of date. Major industries include petro chemistry, automobile & components, equipment manufacturing and light industry.

  • Dalian High-tech Zone

Approved in 1991, Dalian High-tech Zone (DHTZ) is the first national innovation-oriented high-tech zone. The DHTZ covers an area of 153 square kilometers with more than 4700 registered enterprises; 90 percent of all the high-tech enterprises in Dalian are established in the DHTZ. The leading industry clusters in the DHTZ are software and service outsourcing.

  • The Dalian Free Trade Zone

The largest free trade zone in China, the Dalian Free Trade Zone (DFTZ), with an area of 251 square kilometers, was established in 1992. The DFTZ is located alongside the Yellow Sea Coast and consists of Dayao Bay Bonded Port Area, Bonded Zone, Dalian Export Processing A Zone, Shipping Center, and Dalian Automotive Logistics Park. Major industrial clusters in the DFTZ include processing, trade, related logistics and warehousing.

  • Dalian Export Processing Zone

The Dalian Export Processing Zone (EPZ), covering 2.95 square kilometers, was approved in 2000. Major industries in the Dalian EPZ include home appliances, light industry and machinery. The Dalian EPZ is divided into two areas, namely Export Processing A Zone and B Zone, one of which is located in the DFTZ.

  • Dayao Bay Bonded Port Area

Approved by the government in 2006, the Dayao Bay Bonded Port covers an area of 6.88 square kilometers. The Bonded Port is expected to be a world-class bonded cold-chain logistics base by 2015.

  • Dalian Changxing Island Port Industrial Zone

Approved as a state level development zone in 2010, Changxing Island Port Industrial Zone is the second cooperative project between China and Singapore after the Suzhou Industrial Park. The Changxing Island Zone covers an area of 349.5 square kilometers, featuring industrial clusters in port logistics, shipbuilding and new high technology.

Investment Opportunities

Dalian’s government has rolled out various policies to support foreign investment, especially for enterprises set up in the special economic zones. According to the “Catalog of Encouraged Foreign Investment Industries for Dalian,” the following sectors are encouraged for foreign investment in China:

  • Service outsourcing industry
  • Modern service industry
  • Municipal infrastructure industry
  • Manufacturing industry

Specifically, since 1990s, Dalian has been working to build itself as a leader in IT and software development with staunch support from Beijing. Known as a national software export base, Dalian highly encourages foreign investment in the IT industry.

Preferential Tax Policies

According to the preferential tax policies released by the Dalian Free Trade Zone (DFTZ), eligible goods, such as raw materials, spare parts and other materials for processing export products, will be bonded within the DFTZ. Further, transit goods and goods stored in the DFTZ will be treated as bonded goods.

Goods imported into the DFTZ are exempt from import tariff and import linkage tax if they meet the following conditions:

  • Machinery, equipment and other construction materials used in productive infrastructure constructions;
  • Production and management equipments for the DFTZ enterprises; or
  • Reasonable quantity of office supplies and maintenance parts used by the DFTZ enterprises.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

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