Dongguan’s Incentives for Establishing Headquarters

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By Alexander Chipman Koty

Dongguan, a manufacturing hub in South China’s Guangdong province, recently announced new incentives to encourage companies to set up headquarters in the city.

The municipal government will offer a one-time reward of RMB 2 million (US$306,370) to RMB 100 million (US$15.32 million) to companies that relocate their headquarters to Dongguan – depending on the size and nature of their investment.

Companies with functional headquarters in the city will be able to receive rewards between RMB 1 million (US$153,185) and RMB 50 million (US$7.66 million).

Further, companies that have already established headquarters in Dongguan may be eligible for a reward of up to RMB 50 million based on the company’s contributions to the city’s economy over the past five years.

In addition to financial rewards, Dongguan will offer land, office space, talent, and financing incentives.

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By 2025, the Dongguan government hopes to attract over 100 headquarters, according to a policy document. To this end, Dongguan will target the top 100 firms in Guangdong and the top 500 firms in China to relocate to the city.

Dongguan is one of China’s most well-known manufacturing bases, located in the region commonly referred to as the “factory of the world”. Dongguan has the third highest GDP density in China, trailing only the Shenzhen and Shanghai metropolises.

However, increasing labor and land costs have led many companies to shift their lower value manufacturing units to low-cost locations, such as Vietnam and India. The rise of automation in basic manufacturing also poses challenges to Dongguan’s economy.

By attracting headquarters, the Dongguan government hopes to diversify its economy by facilitating the growth of service industries and R&D to complement its already robust manufacturing base.

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Juan Rojas, International Business Advisory Associate at Dezan Shira & Associates’ Guangzhou office, said: “The recent announcement by Dongguan’s city government will certainly increase its attractiveness to both local and foreign investors alike.”

According to Rojas, a key part of Dongguan’s success will be continued integration into the surrounding Greater Bay Area urban cluster.

“Strategically located between Guangzhou and Shenzhen, Dongguan presents low industrial land costs in comparison to its two neighbors, and offers the competitive advantage of having one of the lowest labor costs even compared to other cities in the Guangdong-Hong Kong-Macau Greater Bay Area, such as Foshan, Zhuhai, and Zhongshan,” he said.

Dongguan is not the only Chinese city that is offering incentives for setting up headquarters. Earlier this month, Sanya and Haikou in Hainan province unveiled their own incentive packages to attract headquarters, while Shanghai did the same last year.

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