When seeking a project landing, industrialization and commercialization in the local Chinese market, domestic and overseas enterprises often face various challenges due to the lack of market insights and effective access to the appropriate resources at different levels of the project lifecycle. Choosing an industrial park with extensive industry experience and top-notch resources that match the diverse needs of enterprises is critical for expediting the R&D, market entry and penetration processes. In this issue, we will introduce you to the Longhua District located in Shenzhen, one of the top 4 cities in China.
Introduction to Longhua District
Longhua is a relatively young district in Shenzhen, Guangdong Province - it formally became a district on January 1st, 2017. This district lies in the middle-north of Shenzhen city and covers an area of 175.58 square kilometers, by the end of 2018, it has a total population of ~3.37 million.
Longhua District is one of the main industrial production bases in Shenzhen. Regional pillar industries include manufacturing, trading and information technology. As of the end of 2018, proportion of industry to GDP reached 59.5%, and there were 18,936 manufacturing enterprises (1,180 of them are above designated scale), 374 enterprises with output value of over 100 million RMB, 2,234 national high-tech enterprises, and 17 public-listed companies; it also possessed ~33 square kilometers of industrial land and 653 industrial zones that are above 10,000 square kilometers.
In the year of 2018, Longhua’s GDP reached to 240.18 billion RMB – fifth in the city & top 10 among Guangdong province; GDP growth rate was 10.3% – second in the city; industrial added value from enterprises above designated scale came up to 145.34 billion RMB with growth rate of 18% – fourth in the city; total foreign trade value achieved to 534.91 billion RMB – second in the city with the fastest growth rates of exports and imports; total retail sales of consumer goods attained to 27.63 billion RMB – sixth in the city.
Highlights of Shenzhen’s Healthcare Industry
76 billion RMB gross industrial output, 29.858 billion RMB industrial added value, 22.3% growth rate and 59,714 authorized patents all ranked #2 amid cities in China in 2018.
Leading industry scale in China, 48 listed companies, 11 of which are pharmaceutical companies – most A-share listed pharmaceutical enterprises in China, third most listed medical device producers in China with over 40 billion RMB output value, occupies 8% of China’s medical device market with 12%+ CAGR.
Favorable Policies for Enterprise Landing at the District and Municipal Levels
We selected the landing policies at the level of Shenzhen City and Longhua District that are most relevant to the biomedical industry for the reference of our investors and overseas and domestic enterprises looking to land their business into this district.
Longhua District’s Implementation Guidelines for Industrial Project Attraction and Investment Invitation
Invite quality enterprises in critical industry sectors to land into the district, offering a one-time 3 million RMB reward. Target enterprises should match with the industrial blueprint of Longhua district, have no less than 1 billion RMB of output value or operating income in the past year, and no less than 30 million RMB of total tax pay.
Invite promising start-ups to land into the district. The enterprises should have received over investments of over 20 million RMB from prestigious venture capitals (defined as top 20 VCs or PEs according to the Top Chinese Equity Investment Annual Rankings release by the Zero2IPO Group), 5% of the investment will be issued as up to 2 million RMB reward to the enterprise.
Invite public companies and those listed on the National Equities Exchange and Quotation to land into the district. For those listed in Mainland China (Shanghai and Shenzhen Main Board, SME board, and Growth Enterprise Board), directing the company and tax registration place to Longhua District will result in a one-time 5 million RMB landing reward. For those listed on the National Equities Exchange and Quotation, a one-time 1.5 million RMB reward will be given. For those listed on the OTC market, a one-time 2 million RMB reward will be given.
Invite and incubate projects that can compensate for the weak links of Shenzhen and Longhua District’s industry chains. Enterprises that are recognized at the municipal level to fulfill this requirement and land into the Long Hua District will be given 50% of the reward issued at the municipal level.
Newly landed enterprises that do not possess any assets of lands and buildings are eligible for purchasing business operation, R&D and manufacturing infrastructures at Longhua District with 10% reimbursement for up to 20 million RMB. These enterprises are also eligible for renting these infrastructures from Longhua District with 50% rent reimbursement and up to 4 million RMB subsidy per year for 3 years.
To build a professional industrial ecosystem at the Longhua District, industrial parks in the district that are dedicated to the emerging industries of strategic importance, future technologies, and advanced manufacturing will be given assistance to invite enterprises to join and complete their industry chains.
For each landing of an enterprise with an output value over 100 million RMB and fit the upstream and downstream of an industrial park’s industry chain, both the industrial park and the referral will be given a one-time 100,000 RMB reward. The landed enterprise will be given 70%, 50% and 30% reimbursement of its total rent for business operation for 3 consecutive years with the maximum per year being 500,000 RMB.
Longhua District’s Reward Policies for Marketing Approval Obtainment 2019
Eligible applicants should fulfill the following requirements.
Applicants should have received one of the following marketing approvals or qualification certificates within 2 years before the application date, the certificate must be valid to date and not expired:
FDA approval, European Union cGMP certificate, CE certificate, World Health Organization Certificate, or other international marketing approvals.
Class II or III medical device registration license.
For enterprises who have received domestic or overseas marketing approval in the recent 2 years, 50% of the certification fee or a maximum of 1 million RMB for national and international certification and up to 500,000 RMB for provincial/state level certification can be issued as a reward. Certification renewal is not eligible for obtaining repeated rewards. The total amount of reward for each enterprise can be up to 5 million RMB per year.
Shenzhen's Special Purpose Fund for Supporting Development of Innovative Industries
Eligible industry sectors for this policy are valued by Shenzhen for its emerging strategic importance, examples may include information technology, high-end equipment manufacturing, environment and sustainable development, biomedicine, digital economy, materials science, and marine economy.
Assign up to 10 million RMB financial support for encouraging enterprises to establish cooperation with academic and scientific institutions and tackle critical technological challenges in developing emerging industries.
Assign up to 10 million RMB financial support to facilitate enterprises with expediting the translation of manufacturing processes, technologies and products by building pilot testing bases and product lines.
Assign up to 10 million RMB financial support to promote the innovations in technologies, products and business models that fit the market demands, and to encourage the enterprises to conduct experimental launches to promote the adoption of these innovations.
Encouraging enterprises to undertake projects for industry development on the national and provincial (ministerial) level, offering up to 1:1 financial support with the maximum being 15 million RMB. The financial supports from Shenzhen and other national and provincial level sources can be up to 40% of the total investment into the project.
For the landing of international high-end R&D enterprises that match the needs of Shenzhen’s industry chain, and for projects that can bring outstanding social and economic benefits, a special-purpose fund will be set up under the permission of the municipal government to offer a full range of supports for R&D, equipment procurement, etc.
Explore the creation of special-purpose funds for supporting the pilot testing processes of critical industries. Financial supports will be given in priority to support overseas M&A projects and the investment targets located by the fund.
Reinforce the cooperation with equity investment organizations to offer up to 30 million for supporting industrial projects. Financial supports are delivered in two ways including equity financing and direct funding, the amount for each part can be up to 15 million RMB.
Support enterprises to utilize methods including bank loan and bond financing for implementing critical industrial projects, offering 70% interest discount for up to 15 million RMB.
Guide banks to offer credit loans for up to 15 million RMB to support the industrialization of medium-sized and small enterprises, offering risk compensation for 50% of the principal loss and 50% interest discount.
Guide guarantors to offer a secured loan guarantee for up to 15 million RMB to support the industrialization of medium-sized and small enterprises, offering risk compensation for 50% of the principal loss and 50% interest discount.
Guide financial lease organizations to provide supports for the financial leasing of equipment for industrialization with a maximum size of 50 million RMB, offering risk compensation for 40% of the principal loss and 50% interest discount.
Offer up to 5 million RMB for supporting the enterprises’ exploration of overseas markets, including the fulfillment of marketing requirements in different regions and countries and the obtainment of various marketing approvals, registration licenses and certificates.
For projects that receive support from the special-purpose fund for facilitating the development of strategically important industries at the municipal level, the special-purpose fund at the district level can offer up to 50% of the total financial support from the municipal level. In the form of interest discount, financial support from the municipal and district level combined can be up to 70% of the total interest generated.
Bridge Point Capital is a private equity firm based in New York with a focus on U.S.-China cross-border investment. We invest in disruptive late-stage healthcare companies that can benefit from penetrating the vast, yet unexplored, Chinese healthcare market. We aim to leverage our expertise in both healthcare and capital markets to provide the best investment platform we possibly can for our investors.