By+Deng+Yaqing

Surrounded by swathes of deserted factories， containers and various steel structures， a 40-meter grey concrete chimney stands silently in the Shekou Industrial Zone in Shenzhen， south Chinas Guangdong Province. “Huayi Aluminum Factory Co. Ltd.” written in white paint on the chimney reminds visitors of the past glory and prosperity the industrial park witnessed two decades ago.

The Shekou Industrial Zone began to flourish when China took the first step toward reform and opening up in 1978. Then， the first wave of enterprises flooded into Shenzhen， the countrys first special economic zone， to snatch up opportunities. As Chinas economic restructuring keeps forging ahead， the Shekou model eventually had to step down from the stage of history.

“Now Shenzhen needs to experience a shift from the manufacturing industry to the service industry，” says Yang Tianping， General Manager of China Merchants Shekou Industrial Zone Co. Ltd. This line of reasoning has been used to justify the establishment of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone.

Neighboring Hong Kong and Macao， Qianhai is located on the major development axis of the Pearl River Delta， one of Chinas most economically developed areas. It covers an area of 15 square km， all of which is composed of land reclaimed from the sea.

“Qianhai is geared to serving the inland and opening it up to the outside world， and Hong Kong will play a unique role in the process，” said Wang Jinxia， spokesman of the Qianhai cooperation zone.

High-end services

When Chinese President Xi Jinping visited Qianhai on the first leg of his trip in December 2012， a focus was placed on the high-end service industry.

Since Hong Kong is far superior to Shenzhen in the realm of high-end services， Qianhai should learn from it amid the ongoing economic restructuring and transformation， said Xi.

“The high-end services Qianhai is meant to develop encompass finance， modern logistics， information and technology，” said Wang.

Hong Kong， the largest offshore yuan market in Asia， is almost certain to benefit from the expansion of cross-border yuan business in Qianhai.

In addition， Qianhai will place emphasis on the development of its port shipping service， to build an important supply chain management center for Asia Pacific and strengthen the production and service capacity of the manufacturing industries in the Pearl River Delta.endprint

Just recently， two major industrial leaders have decided to join forces and set up Chinas first logistical fund in Qianhai， with China Railway Capital Management L.P. acting as general partner and China Logistics Co. Ltd. as investment adviser.

“By the end of October 2013， more than 2，642 enterprises， most of which were financial institutions， had registered in Qianhai with a capital of 205.1 billion yuan （$33.89 billion）. The combination of the financial and logistical industries will have a significant impact，” said Shu Dong， Vice President of Shenzhen Qianhai Development and Investment Holdings Co.

Moreover， information technology will also have a stronghold in Shenzhen.“A cluster of financial magnets have their roots in the city， like Ping An Insurance and China Merchants Bank. As China goes further down the path of modernization，old factories have been reclaimed and been replaced by Internet and e-commerce companies，” said Yang.

Financial reform

On June 27， 2012， the State Council approved a package of 22 reform measures to push forward the development and opening up of Qianhai and decided to support it with pilot policies.

Revolving around the internationalization of the yuan， Qianhai has started crossborder， two-way yuan lending， issuing yuandenominated bonds in Hong Kong and putting them into the Qianhai equity investment mother fund， promoting the backflow of offshore yuan， and introducing various financial institutions from Hong Kong. According to statistics from the Qianhai Authority， the zones administrative committee， 30 of the top 500 multinationals， such as HSBC， Standard Chartered Bank and the Swiss Bank Corp. entered the zone， and cross-border loans hit 10 billion yuan （$1.65 billion） at the end of October 2013.

“Now， cross-border yuan loans are pretty appealing to Qianhai-based enterprises， for they are cheaper than those from domestic banks，” Li Zhen， head of a Qianhai-based investment company， told China Comment， a magazine of Xinhua News Agency.

While the China （Shanghai） Pilot Free Trade Zone （FTZ） is widely recognized as a test field for the boldest financial reforms， some of the reform measures overlap those carried out in Qianhai.

“While the Shanghai FTZ stresses the opening up of the trade and investment sector， Qianhai lays a focus on the financial industry，” said Wang， who believes the establishment of Shanghai FTZ will enlighten and encourage Qianhai to make further progress.endprint

As opposed to the large number of enterprises already registered in Qianhai by October 31， 2013， Hong Kong companies only made up 5.78 percent， with a registered capital of 14.32 billion yuan （$2.37 billion）.

He Zijun， Deputy Director and Spokesman of the Qianhai Authority， said that the enthusiasm of Hong Kong companies has been crippled in three ways. Firstly， the policy has not yet been promulgated to lower the rate of corporate income tax to 15 percent； secondly， supporting facilities have not been fully put in place and thirdly， there are uncertainties as regards land leasing.

Prospective FTZ

Neighboring Hong Kong and Macao， Guangdong is making preparations for the approval of its own FTZ by the Central Government， said Liu Wentong， head of the financial office of Guangdong Provincial Government， at the Seventh Asian Financial Forum held on January 13.

In the future， the Qianhai cooperation zone in Shenzhen， Hengqin New Area in Zhuhai and Nansha New Area in Guangzhou will generate a synergy as components of the Guangdong-Hong Kong-Macao FTZ， and a financial center with international influence will gradually take shape， said Liu， who suggested that the total financial assets of the three regions had exceeded 30 trillion yuan（$4.96 trillion）.

He Zijun， Deputy Director for Qianhai Authority， suggested that Qianhai is in a good position to exploit profits from cross-border yuan business enabled by the cooperative economic circle， and destined to do a better job than ordinary FTZs.endprint