Zhongguancun (Science Park) is often called the Silicon Valley of China, with many successful startups and a good investment climate. So far there are 246 listed-companies in the park, and in 2013 alone there were 6000 new companies founded. From Forbes’ China’s 30-under-30 list a staggering number of 10 entrepreneurs come from this relatively small area in Beijing.

It is therefore not strange that the Chinese government would like to reproduce these results throughout China. To that end the State Council decided to implement six items of Zhongguancun’s preferential policy throughout the entire country. This decision came forth during an executive meeting presided by Li Keqiang, the current Premier of the State Council.

Infographic of the executive meeting of the State Council

Source: english.gov.cn (State Council website)

The mentioned preferential policy covers several aspects, including funding of scientific research project, financing support for micro and small-sized enterprises (MSEs), tax deduction on scientific research and faculty expenditure, promote stock equity incentives, and technological achievement management. The meeting emphasized that the government should focus on less intervention of the market to support innovation.

The State Council also decided to instruct all national self-reliant innovation demonstration areas as well as some regional projects to implement four more recent policies which Zhongguancun has already implemented. These policies are:

  • Technicians and managers can pay income tax imposed on share options in installments over five years.
  • Venture capital firms, in the form of limited partnerships, will pay reduced income tax if they have been investing in unlisted small-and medium-sized hi-tech enterprises for more than two years.
  • Enterprises that grant non-exclusive licenses for others to use their intellectual property for more than five years will be able to enjoy a tax cut on revenue from the deal.
  • Individual shareholders of small-and medium-sized hi-tech enterprises can pay the income tax on their bonus shares paid out of the company’s capital reserves in installments over a period of five years.

According to Zhao Guoqing, President of the Z-Park Association of Internet Finance, these policies will lower startup costs and inspire entrepreneurs to create companies.

Zhongguancun has become very well developed in the past two decades with the help of these special supporting policies.This decision may speed up a better entrepreneurial environment in China. Let’s see whether China will welcome a golden age for entrepreneurs in the near future.

Source: english.gov.cn (State Council)