The Role of Chinese Government in Business Incubators
4.2 Financial Support
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
4.2 Financial Support
Funding is one of the key elements for Chinese BIs sustainability, the incubators
and incubatees alike depend to a large extent on government policies and funding. The
government financial aid and tax incentives can reflect on the economic output of BIs
and incubatees.
(1) Financial Aid to Incubatees
According to the statistics published by Torch Center (科学技术部火炬高技术
产业开发中心, 2017a), from 2011 to 2015, the Chinese government has made a
massive financial support to incubating enterprises in order to promote the incubating
ability to regional innovation and entrepreneurship. The revenue of incubating
enterprises has risen with government financial support, while the reducing financial
aid led to the decreasing revenue of incubatees. The government financial aid has
reflected the revenue of incubatees, which means the more financial aid to incubatees,
the more revenue of incubatees received, and the more economic output was created.
Figure 11 indicated that the incubated enterprises can create average 26 times of
revenue with government investment. It also demonstrates that the financial support has
a positive correlation with the revenue of incubatees.
‧
Figure 11. The revenue of incubatees and amount of financial aid received by incubatees Source: 科学技术部火炬高技术产业开发中心 (2014), (2015), (2016) and (2017a)
In addition, the growing number of BIs have driven the amount of incubatees and
its employees. It is notable that the revenue of incubatees was less than RMB 25 million
in 1995 went up to RMB 4,810 million, nearly 200 times of growth over the last two
decades. It demonstrates that the more entrepreneurs and enterprises engaging in
incubation system, the more money that incubatees actually receives during a specific
period. Moreover, the increasing accumulated number of graduated incubatees are the
significant power in employment marketplace as some of them create direct and indirect
employment after leaving incubation system. Their revenues in turn contribute to
regional economic growth. The result given in Figure 12.
3800.6 4147.1
Revenue of Incubatees Amount of Financial Aid Received by Incubatees
‧
Figure 12. The economic indicators of BIs and incubatees Source: 科学技术部火炬高技术产业开发中心 (2017a)
(2) Tax Incentives to BIs and Incubatees
It is noteworthy to mention that the Chinese government provides tax incentive
and deduction to high-tech enterprises in National High-tech Zones (NHZs) (or
referring to S&T parks). The main purpose of NHZs is to incubate the potential
high-tech enterprises and to promote high-technology transfer, as well as to play a key force in
Chinese economic growth. NHZs can be seen as a big incubation as they can form an
innovative cluster. NHZs are not only enjoying the special tax incentives by
Revenue of Incubatees (RMB 100 million) Number of BIs
Number of Incubatees
Number of Employees of Incubatees (1,000 person) Accumulated Number of Incubatees Graduating
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
Over the decades, Chinese government has been dedicated to promote the
development of new and high-tech industries in China by providing tax incentives and
relevant policies to High-tech enterprises in NHZs. On March 6, 1991, the State Council
of the PRC approved tax incentives and supportive policies, which target at new and
high-tech enterprises located in NHZs (科学技术部火炬高技术产业开发中心, 1991).
The following tax incentives are a few measures that reflect the Chinese government’s
effort to encourage S&T developments:
- To reduce corporate income tax rate to 15 per cent for high-tech enterprises of the
NHZs.
- When the output value of export of the NHZs enterprises exceed 70 per cent of its
total annual output value, the income tax shall be levied at a reduced rate of 10 per cent.
- The newly-established enterprises could be exempted from income tax in the first two
operation years.
- The Chinese-foreign equity joint ventures newly-established in the NHZs are
scheduled to operate jointly for a period of 10 years or more can be exempted from
income tax in the first two years after it has begun to make a profit.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
- High-tech enterprises using domestic investments with an annual net income not
exceeding RMB 300,000 from technological transfer and consultation, services and
trainings related to this transfer shall be temporarily exempted from income tax.
- For all high-tech products developed under the Torch Program, and conforming to
exemption and reduction conditions for new products, the amount derived from tax
exemption or reduction on products and on the added value of products shall be used
specially for the technical development and shall be exempted from income tax.
In addition to tax incentives, taxation deduction policies have also been used as
instruments of innovation and entrepreneurships policies in China. As far back as 2008,
the Ministry of Finance of the PRC (MOF) published tax deduction for eligible BIs (中
华人民共和国财政部, 2007). The eligible BIs can enjoy tax deduction from 1 January
2008 to 31 December 2010, such as the qualifying BIs shall be exempted from real
estate tax and urban and township land use tax on properties or land for own use, and
provided free or leased to incubated enterprises etc. Since then, the government has
never stopped supporting BIs development. The MOF kept implicating tax incentives
for BIs from 1 January 2013 to 31 December 2015 (中华人民共和国财政部, 2013).
Moreover, the continuance of previous tax incentives for BIs has taken effect again on
1 January 2016 to 31 December 2018 (中华人民共和国财政部, 2016). From 1 January
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
2016 to 30 April 2016, business tax shall be exempted for income derived by eligible
BIs from renting sites or buildings, and providing incubation services to incubated
enterprises etc.
The above taxation incentives can reduce the operation cost of BIs to make
investments that benefit the community. Benefit from the policies support, the
economic output of NHZs has reflected on the growing number of export, tax submitted
and gross industrial output value. Firstly, the tax incentives and policies have made an
effect by observing the growth trend of tax submitted from NHZs. The amount of tax
returns can also present the profitability of incubating enterprises. The more revenue
increased, the more tax submitted. Secondly, the business revenue is not only reflecting
on the tax submitted, but also showing the growth of export. The amount of export was
less than USD 30 million in 1995 surged to USD 4,733 million in 2015, reached 163
times of growth over the last two decades. The results given in Figure 13. The ability
to export goods helps an economy to grow, by selling more overall goods and services.
Exports are a crucial component of a China's economy. Not only do exports facilitate
international trade, they also stimulate domestic economic activity by creating
employment, economic output and revenues. It may even present an opportunity to
capture significant global market share. Last, the growth of export also adds to the
‧
producing country's gross industrial output value. From 1995 to 2015, the blue line in
Figure 13 shows the gross industrial value was growing stably, which indicates the great
contribution of the industries' labor and capital to the country. It demonstrates that more
and more entrepreneurs and enterprises are attracted by NHZs’ resources which gather
a competitively cluster that boosting regional economic development.
Figure 13. The export, tax submitted and gross industrial output in NHZs, 1995-2015
Source: 科学技术部火炬高技术产业开发中心 (2017b)
Export from National Hich-tech Zones (USD 100 million) Tax Submitted from National High-tech Zones (RMB 100 million)
Gross Industrial Output Value in National High-tech Zones (RMB 100 million)