Emerging cities: Guangzhou

Guangzhou (pronounced ˈgwäNGˈjō) is the commercial hub of south China and the capital of Guangdong province. Located in the heart of the densely populated Pearl River Delta, about 120 kilometres north-west of Hong Kong, it is China’s third-largest city and one of the most rapidly developing.

Guangzhou’s population is 12.7 million. It has grown by 27% in the past five years. GDP per capita has increased by 10.2% over the same period, which is the 22nd highest among world cities.

“Guangzhou was traditionally the city in China that had the strongest business links with the British Empire,” said Vicky Li, regional director in northern Asia for the Chartered Institute of Management Accountants. “It is the cultural base of the Cantonese people, with a huge population of Chinese diaspora. It is fast becoming the most pro-business and pro-market region of China, and some of the country’s most successful businesses started, and flourished, in the city — Tencent and Huawei, for example.”

Ease of use

The World Bank’s Doing Business 2013 report ranked China 91st out of 185 countries.

• Average time to register a business: 33 days. The Organisation for Economic Co-operation and Development average is 12 days.
• Construction permits: These are difficult to obtain and take an average of 270 days.
• Securing electricity: China is ranked 114th. It takes an average of 145 days to establish a permanent electricity connection.
• Transparency International corruption index: China is ranked 80th out of 182 countries.

Market costs

• Corporate tax: 25% for resident companies; 20% for non-resident companies and certain SMEs. High-/new-tech companies that are supported by the state pay a reduced rate of 15%.
• Average monthly wage: CNY4,789 (about $773).
• Commercial rent: Guangzhou has four major office districts. Zhuijang New Town CBD is the most expensive, with an average rental rate of CNY183.3 ($29.11) per square metre per month. Yuexiu is the cheapest with an average rental rate of CNY124.4 ($19.76) per square metre per month. The citywide availability is 8.6% of total office space.
• Retail rent: The average rent for high-end shopping malls was CNY1,315 ($210) per square metre per month in Q4 2012.
• Industrial rent: In 2012, warehouse rent was CNY2.85 ($0.45) per square foot per month, and factory rent was CNY2.73 ($0.43) per square foot per month in the Guangzhou Economic and Technological Development Zone.

Four tips for success

Laurence E. “Larry” Lipsher, CPA, CGMA, author and tax consultant at prctaxman.corp in Guangzhou, offers the following tips for outsiders considering the market:

1. Consider investment in Nansha, the southern-most portion of the city. It is one of three subsections of cities in China that are in the country’s 12th Five Year Plan. Nansha is projected to become a governmental hub within the next 15 years.
2. Prepare for banking challenges. Businesses that are not state-owned will have difficulty getting local financing.
3. Understand currency regulations. You will need to know how to work within the confines of the laws and regulations imposed by the State Administration of Foreign Exchange.
4. Gain knowledge of the “system”. Western companies expecting to do things the “Western way” will face obstacles. A lack of appreciation for the Chinese way of business has led to many a business’s downfall. Lipsher adds: “If you do not have the patience to develop the trust and friendships you need, then you will fail.”