4. Investment in Liaoning

Economic Development Policies for Liaoning

Since 2003, the state has implemented the “Strategy to Regenerate Northeast China” to support economic restructuring and reform in the three northeastern provinces and part of Inner Mongolia. The region is an industrial base traditionally headed by Liaoning. Efforts have been made particularly on restructuring of state-owned enterprises to meet the need of the market economy, and on encouragement and support of private economic development and foreign investment.

Preferential fiscal and financial policies and instruments have been provided to facilitate fast development in the region. A number of foreign-funded financial institutions, including HSBC, BEA, Standard Chartered, Korea Development Bank, Mizuho Corporate Bank, set up branches and offices in Liaoning, particularly in Shenyang and Dalian, to provide financial services to foreign funded companies and Chinese companies as well. More international acquisitions and mergers also took place in Liaoning in the field of machinery, aeronautics and automotive manufacturing.

Infrastructure, and especially the transportation networks, are being greatly improved. Liaoning already ranks number one among larger provinces in railway density (after the provincial-level cities of Beijing, Shanghai and Tianjin). The expressway network is also exemplary for China, but under environmental considerations, focus of further expansion remains on railways. The high-speed railway between Harbin and Dalian is under construction and the part in Liaoning will be put into use in 2011. Construction of the high-speed railway from Shenyang to Beijing will start in late 2010. For these railroads, completely new, mostly elevated tracks are being built which are designed to support trains at a speed of more than 400 kilometers per hour.

In September 2009, the State Council reconfirmed its strategy and extended support for its implementation. According to “State Council Document No. 33” (see Appendix for full text), the reform process will be deepened, includes support to small and medium size enterprises, to investment promotion, and to trade and cooperation with other countries. Regional synergy in economic development and the coordination of regional development beyond provincial borders are highlighted. In Liaoning, two regional strategies were just approved by the State Council as national strategies in November 2009 and April 2010, one for the coastal area along the Yellow Sea and Bohai Bay, known as the “Liaoning Belt” strategy, and the other for the Shenyang Metropolitan Region with seven major cities surrounding the provincial capital, known as the “Shenyang Metro” strategy.

These national strategies cover 13 of the 14 prefectures in Liaoning. One of them even belongs both to the Belt and the Metro and benefits from both strategies. Liaoning has also adopted a strategy for Liaoxibei in the Northwest of the Province. These strategies incorporate urbanization, social welfare, and environmental considerations into the objective of a harmonious economic development.

Development of the Liaoning Coastal Economic Belt (2009-2020)

The “Liaoning Coastal Economic Belt” includes all six prefectural cities flanking the Yellow Sea and the Bohai Bay: Dalian, Dandong, Jinzhou, Yingkou, Panjin and Huludao. This Belt has a coastline of nearly 3,000 kilometers and a land area of almost 58,000 square kilometers. More than 17.8 million Liaons live here, they created about 45 percent of the total GDP of Liaoning in 2008.

The Liaoning Belt development strategy aims to strengthen the region as northeast China’s access point to the sea and a vital economic gateway to northeast Asia and other regions in the world. Specifically, the six port cities with Dalian as the center will be built as an important international shipping center in northeast Asia. Infrastructure conditions including navigation capacity and logistics systems will be particularly improved for better service.

Upgrading the industrial structure in the Liaoning Belt is focusing on development of major industrial clusters, such as

advanced equipment manufacturing


raw material processing


new energy.

Also, the service sector is developing fast, from innovation in financial services by establishing public information platforms, to international competitive software development as a base of outsourcing industry. Another focus is on high-quality farming and processing of food and other agricultural products, such as sea food, rice, fruits, vegetables, and flowers.

The Liaoning Belt strategy is also ambitious to develop this area into a place where Liaons can live and work comfortably and build a moderately affluent society. Cleaner production is promoted in the industrial process and natural conservation along the sea and inland are important elements of the strategy. Foreign investment is particularly encouraged for hi-tech industries, the service sector, advanced manufacturing, infrastructure construction and ecological protection.

The Liaoning Belt is one of the most promising regions in China. Its development strategy is adopted in Liaoning as guideline for the next 10-year development. It is important for China to have the zone as a good example for revitalizing traditional industrial areas, similar to the Ruhr Area in Germany.

Development of the Shenyang Metropolitan Economic Area

Leaving the Liaoning Belt towards the center of the province, you will reach the Shenyang Metropolitan Area, a region covering some 75,000 square kilometers and including seven prefectural cities around Shenyang, namely Anshan, Fushun, Benxi, Yingkou, Fuxin, Liaoyang and Tieling. This region has 23.6 million inhabitants and a 2008 GDP of 878 billion RMB (about 126 billion USD).

The Strategy for the Development of the Shenyang Metropolitan Area (Shenyang Metro) was approved by the State Council in April 2010. Detailed plans are being elaborated for implementation. Shenyang Metro is the eighth experimental reform region in China, and its development strategy is the only one concentrating on “new industrialization”. The core of this strategy is innovation in industrial development, integration of the eight cities, integration of urban and rural areas as well as interventions towards more market-oriented development.

The transport system is being further developed to achieve a “one-hour circle” among the eight cities where each location in Shenyang Metro may be reached from the center within 60 minutes. High-speed railways, inter-city railways, subways, highways and roads are being heavily invested in. A number of satellite cities and towns are emerging along the connecting nodes between the cities.

Industrial clusters are already thriving in the fields of

advanced energy equipment

hydraulic tools

fine chemicals

equipment manufacturing

high-quality steel products.

Priority is now given for the development of nine new industries, namely

advanced equipment manufacturing

new energy

new material

new medicine/pharmaceutical


energy saving/environmental protection



hi-tech services.

Both domestic and foreign investment is encouraged for the industrial clusters, key industrial parks, the construction of satellite cities and towns and for inter-city transport line development.

Development of the two national level strategies, the Liaoning Belt and the Shenyang Metro, are set to support and complement each other, turning Liaoning into a new growth engine of China.

Economic Development Strategy for Northwest Liaoning

The northwest of Liaoning, called Liaoxibei, includes the prefectures Fuxin, Tieling and Chaoyang with an area of 43,000 square kilometers and 8.4 million inhabitants who contribute about 8 percent to the total GDP of the province. A bit further inland from the coastline, this hilly area is rich in land and mineral resources, including coal, iron, manganese and molybdenum.

Great support is given by the provincial government and investment has been promoted in the field of resource development and processing. Investment is particularly welcome in the key industries of the area, such as metallurgy, building materials, chemical and agricultural product processing. Besides, both living costs and human resources costs are lower than the other parts of Liaoning. Ecological considerations are being highly strengthened and wide area afforestation is being undertaken in Liaoxibei.

Translating Strategies into Investment

Preferential Investment Policies

Foreign investors may invest in Liaoning to set up joint venture enterprises, cooperative enterprises and wholly foreign-owned enterprises and joint stock companies, in the forms of materials processing, component assembly, compensation trade, leasing, and build-operate-transfer (BOT).

The regulations of the Liaoning government encourage foreign investment. They include tax incentives, assistance offered to foreign-invested enterprises to solve balance of payments issues, and preferential policies on materials supply and cutting site-use fees for foreign-invested enterprises

Key policies in the Liaoning Coastal Belt include lower corporate income tax for high-tech firms and priority given by the provincial financial authorities in granting interest subsidies on loans for technical transformation and service projects in the sectors of equipment manufacturing, raw material processing, fine chemicals, deep processing of agricultural products, textiles, and pharmaceuticals.

The major policies and measures include to further increase the state’s fiscal support, to enhance financing support, to re-establish the credit of Northeast China, to integrate all types of resources, and to set up an integrated common platform for regional development.

Investment Location: Designated Development Regions

Although investment is welcome in most regions of Liaoning, special preferential conditions are offered in designated zones or development areas. The national and provincial governments have defined 56 areas in Liaoning, separated into 14 “national level” and 42 “provincial level” development zones. Domestic and foreign investment is especially encouraged in these zones.

The zones may be differentiated into Economic Development Zones, High-Tech Zones, Free Trade and Export Processing Zones, and special zones. Check details on 22 of them in this guide.

11 Economic Development Zones

5 High-Tech Zones

5 Free Trade and Export Processing Zones

1 National Tourist Resort.

Investment Industries: Encouraged in Liaoning

It is part of the national policy to encourage foreign investment in some sectors and industries, to allow investment in other industries without encouraging it, and to prohibit foreign investment in a few undesired industries. For some encouraged industries, a further distinction is made about which side should or is allowed to control the majority of shares in joint ventures.

According to the “Catalogue of Priority Industries for Foreign Investment in Liaoning Province”, issued by the National Development and Reform Commission and the Ministry of Commerce in 2006 as Decree No. 47, the following industries are strongly encouraged in Liaoning:

Development and production of grain, oil-seeds, vegetables, fruit seeds (seedlings), except for genetically modified seeds. The Chinese side wants to control the majority of shares in this sector.

Breeding and product processing of chicken, pig, beef cattle, mutton sheep, cow, deer, and Cashmere goat.

Follow-up industrial development of national key ecological projects such as returning farmland to forests or grasslands.

Processing and comprehensive utilization of oil shale, magnesium, and zircon. The Chinese side wants to control the majority of shares.

Spinning, knitting and garment processing of high-grade cotton, wool, hemp, silk (tussah silk), and chemical fiber textile.

Deep processing of natural medicine, raw material medicine, and traditional Chinese patent medicine as well as the production of their derivatives. This does not include the production of vitamin C and penicillin, and those items listed in the Catalogue of Prohibited Foreign Investment Industries.

Cement clinker production of dry cement with daily output of 4,000 tons and above.

Using large-scale equipment and technology to produce methanol products with coal as raw materials, minimum of 60 tons per year and above.

Production of ethylene and deep processing of downstream products.

Production of radial tires.

Manufacturing of metal packaging, automated tridimensional warehouse and storage logistics equipment.

Manufacturing of automobile parts and accessories.

Manufacturing of marine diesel engines, auxiliary equipment, parts and components, and accessories.

Development and manufacturing of digital medical equipment and key components.

Deep processing of high-precision copper strip.

Manufacturing of steel wire connection and ultra-fine steel wire rope.

Medical institutions. In this sector, foreign parties are allowed to hold majority shares subject to approval.

Construction and operation of urban central heating, gas supply, water supply and drainage networks. Foreign parties are allowed to hold majority shares subject to approval.

Development and protection of tourist scenic parks as well as the construction and operation of supporting facilities.

Deep processing and alternative industries in resource-exhausted cities. Investment projects enjoy preferential policies for industries in encouraged categories, subject to approval.

Legal Framework and Procedures

Legal Framework for Investment in Liaoning

As the deepening of reform and opening up endeavors, more and more foreign investors have entered the Chinese market. After China’s accession to the WTO, the government paid more attention to matching international norms by adjusting and revising policies, and gradually launched new regulations on foreign investments, with a view to creating a favorable legal environment for investors.

Relevant laws and regulations cover various aspects of foreign investment in China: incorporation, management, mergers and acquisitions, financing, listing, which not only provides a legal basis for foreign investment, but also effectively protects the interests of foreign investors in China.

The laws and regulations and their main features pertaining to foreign investment in China use the

Company Law of the People’s Republic of China

as the common law, which regulates companies and enterprises and stipulates corporate forms and governance structure. For foreign-invested enterprises, the National People’s Congress and its Standing Committee have formulated the

Law of the People’s Republic of China on Foreign-funded Enterprises,

Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures,

Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures.

Along with the respective rules for implementation, they constitute the legal basis pertaining to regulating the incorporation, corporate forms and management of foreign-funded firms in China. That is to say, foreign investors intending to set up subsidiaries in China should mainly follow the three laws above and their respective rules for implementation. Should the three laws and their rules for implementation have unclear provisions; foreign investors can refer to the relevant provisions of the Company Law. The organizational form of foreign-funded firms should be limited liability company, and such firm may also assume other forms upon approval, such as joint venture limited liability company and others. Other relevant laws and regulations:

Catalogue for the Guidance of Foreign Investment Industries

Regulations for Merger with and Acquisition of Domestic Enterprises by Foreign Investors

Measures for Liquidation of Foreign Investment Enterprises.

With globalization and the stronger impact of the Chinese economy in the world, China has seen the emergence of a large number of professional legal counsels who provide high-quality and efficient legal services to foreign-funded firms. China’s current legal environment can provide adequate protection for foreign investment in China.

Investment Procedures Chart

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