Shenzhen has offered generous incentives to Hong Kong's financial firms to encourage them to set up back offices across the border.

South China's booming city has taken a "substantial step" to fulfill its goal of becoming a back office centre for Hong Kong's premier financial industry, Shenzhen Mayor Xu Zongheng told a seminar in Hong Kong yesterday.

"After analyzing the global financial market, we have seen that a growing number of companies concentrate their efforts on front-desk services but move out or outsource their back office services," Xu told representatives of more than 80 financial firms.

"We would like to take the opportunity to become the best destination of Hong Kong's financial firms for their back offices," he said. And such cooperation could reinforce Hong Kong's position as a world financial hub.

"While transferring the non-core, low-valued sectors outside Hong Kong, the (financial) industry could provide more efficient and competitive front-desk services."

The new incentive policies are Shenzhen's first big step towards upgrading its financial industry, one of its four core industries, after the municipal government worked out its own 11th five-year plan (2006-10) last month.

They provide government rewards and subsidies in terms of land, housing and accommodation to financial firms, including centers for credit cards, calls, bill settlements and back-ups, research and development, information technology and data and business processings. The firms' executives too would get a centre to themselves.

These newly established or newly moved in departments will get a one-off reward of 500,000 yuan (US$62,500) once approved.

Back offices that employ more than 100 people, or take up an office area of at least 2,000 square meters, or actually invest more than 30 million yuan (US$3.75 million) could get a one-off reward of 2 million yuan (US$250,000).

The highest reward could be up to 5 million yuan (US$625,000).

Also, the government could refund up to 40 per cent of the land costs to the back offices and give the buyers subsidies. Tenants could also end up paying up to 40 per cent less rent for three years.

That's not all. While guaranteeing the most convenient and efficient services, the administration will grant a monthly accommodation subsidy to every senior executive.

Some of the financial companies in Hong Kong have expressed interest in the neighboring city, which also has the advantage of low labor and land costs, quality talents and has an established financial settlement and clearance system.

Seven companies, including Standard Chartered Bank (SCB), Bank of East Asia, Wing Lung Bank and China Insurance HK (Holdings), signed letters of intent with Shenzhen officials for setting up branches or back offices in the city.

Several banks such as HSBC, Bank of East Asia and Standard Chartered Bank have already set up branches in Shenzhen. SCB also has a back office in Shenzhen and plans to expand it into a national centre.

At the seminar, Secretary for Constitutional Affairs Stephen Lam agreed that a combination of Hong Kong's status as an international financial centre and Shenzhen's strengths in technology, talent and comparative cost would raise the competitiveness of both places and strengthen the region's financial services.

The mayor-led delegation met Chief Secretary for Administration Rafael Hui, Financial Secretary Henry Tang and Stephen Lam yesterday, and would meet Chief Executive Donald Tsang today before returning to Shenzhen.

(China Daily HK Edition April 13, 2006)