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China government looks to push inward
Michael McManus, DIGITIMES, Taipei [Wednesday 24 August 2011]

A recent article from the state-run China Daily shows how the China government is touting the benefits of investing in the Chongqing economic zones, with the article basically providing a laundry list of the tax incentives and subsidies for companies investing in the region. It comes as no surprise that China is marketing the region through the state-run media, and a recent Digitimes Research report outlines the strategies China's government is using to encourage development of the electronics manufacturing bases in China's central and western regions.

According to the China Daily article, companies that invest in the Chongqing Zone qualify for a favorable tax rate of 15%, compared to the standard 25%, while manufacturing and IT companies also qualify for land incentives, such as subsidies for land purchases, factories. The local government also offers a subsidy (equivalent to 25% of the annual interest rate) on bank loans. Hi-tech firms can also qualify for a grant of up to CNY3 million (US$469,000) after a year of operation.

According to Digitimes Research, China's recently published 12th Five Year Plan clearly states the government's intention to address the neglect of the central and western regions, while expanding domestic markets and reforming the country's existing industrial strategy.

Government initiatives are not limited to the tax breaks and subsidies listed in the article. Digitimes Research outlines how transport infrastructure is gradually being put in place and that central and western regions will be the most important manufacturing sites for the coming decade. The electronics industry has by no means been excluded from this trend, with some major notebook manufacturers already sourcing a significant proportion of their shipments from Chongqing and Chengdu, the major cities in the central and western regions.

Moreover, the pace of development in these areas will only increase as time goes by and the regions are expected to claim three of China's 10 core cities for the ICT industry for the next 10 years.

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