New Industry New Life
New Ecology
Rizhao International Ocean City — the Blue New City Investment Report on Rizhao International Ocean City
1
Ocean City (Rizhao IOC) is supported by China’s national government strategy
International and national stakeholders have assembled to actively drive Rizhao IOC’s development
• In 2011, China’s State Council approved Rizhao IOC as a key Sinoforeign cooperation project in its “Development Plan for Shandong Peninsula Blue Economic Zone” • The government’s vision for Rizhao IOC is to become a cluster for modern marine industry encouraging Sino-foreign cooperation, as outlined in the national12th Five-Year Plan on Marine Economy
• Singapore-Shandong Business Council is supporting Rizhao IOC as a key project • Urban planning jointly driven by Rizhao IOC and Singapore Surbana Group will adopt the development concepts of “New industry, new life, and new ecology” • Academic and professional institutions working with Rizhao IOC include the Ocean University of China, Shanghai Ocean University, Institute of Oceangraphy of Chinese Academy of Sciences and the research institutes of State Oceanic Administration of China
日照国际海洋城投资环境报告2013 Rizhao International
Key geographical location
Beijing Seoul Jin-Zhong-Nan Railway
Tokyo
• East Asia access within a three-hours’ flight • Rizhao City governance enables Rizhao IOC to enjoy national support as part of Shandong Peninsular Blue Economic Zone • Important estuary from central China to the Yellow Sea
Shandong Province Shanghai
Rizhao IOC
• Linking two deep-water port areas, Rizhao Port area and Lanshan Port area, who are forecasted to achieve a total annual port throughput of 600 million tons • Embodies a rare long coastline of 16.5 kilometres • Habitat Scroll of Honor Award from the United Nations for favourable living environment
Hong Kong South China Sea
National Strategy
Advantageous natural environment
Infrastructure for sustainable growth
Growth
Rizhao International Ocean City Water sports Marine Industry Marine Economic Zone Investment Deep-water ports Sino-foreign Ecology cooperation
• Construction of an international airport, multiple inter-city high speed railways and the Jin-ZhongNan Railway (linking Shanxi to Rizhao) will soon be finished • Abundant human resources and R&D support from Rizhao University and Scientific Park
© 2013毕马威企业咨询 (中国) 有限公司 — 中国外商独资企业，是与瑞士实体 — 毕马威国际合作组织 (“毕马威国际”) 相关联的独立成员 所网络中的成员。版权所有，不得转载。
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日照国际海洋城投资环境报告2013
“
Rizhao IOC’s marine industry cluster will provide abundant opportunities for investors to participate in this fast growing industry sector with a relatively low cost
”
Focus industries Marine services Marine engineering and machinery Marine biology Comprehensive utilisation of sea water Marine ecology Coastal advanced manufacturing
Investment opportunities Value chain Leverage existing marine industry value chain and support from Rizhao City and Shandong Province
Market Access regional markets covering Shandong, central China, East Asia and beyond
Growth Benefit from the region’s developing ocean economy
fast
Cost Gain profitable return from lower costs comparing with other coastal cities
© 2013毕马威企业咨询 (中国) 有限公司 — 中国外商独资企业，是与瑞士实体 — 毕马威国际合作组织 (“毕马威国际”) 相关联的独立成员 所网络中的成员。版权所有，不得转载。
Contents 04
Geographic location and economic foundations for marine industry
05
Concept and vision
06
Investment considerations
07
Comparative advantages of Rizhao IOC
08
Investment opportunities
09
Business and living environment
10
Incentive policies
11
Blueprint of Rizhao IOC
13
Key industries
20
Appendix
Prof. Ting writing an inscription for Rizhao IOC Prof. Samuel C.C. Ting (Ding Zhaozhong), the 1976 winner of the Nobel Prize for Physics and currently investigating dark matter, originated from Taoluo Township of Rizhao IOC. He often visits to consult on Rizhao’s development
“We have been honored to visit Rizhao today to learn more about the Ting family heritage and the exciting future of Rizhao” -- Nobel Prize Winner Samuel C.C. Ting, 2012
日照国际海洋城投资环境报告2013
4
Geographic location and economic foundations for marine industry
Economy
Basic information
Overview of Rizhao 2012 City level
Prefecture-level city in Shandong province
Population
2.89 million
Disposable income of urban population per capita
CNY 22,877
Major industries
Logistics, equipment manufacturing, high-end steel manufacturing, etc.
Number of universities / university student number
8 universities / 70,000 students
GDP, CAGR for the last five years
CNY 135.26 billion, 15% growth
Total value of import and export, CAGR for the last five years
USD 25.25 billion, 28.5% growth
Port throughput, CAGR for the last five years
284 million tons, 17.2% growth
Proportion of marine industry added value of local GDP
44.1% (2012), 42.5% (2011)
Number of tourists, CAGR for the last five years
28.24 million, 17.8% growth
Within one hour flight Within two hour flight Within three hour flight Beijing
Chengdu
Seoul
Shanghai
Tokyo Rizhao International Airport (commence in 2015)
10 km to Rizhao Port
Rizhao downtown
Hong Kong
Rizhao IOC
10 km to Lanshan Port
Sources: Rizhao IOC Administration Committee; Rizhao 2012 Statistics Report
04
05
Concept and vision
1
6
Six design concepts leveraging Singapore’s planning experience
Mutual growth for the marine industry and the city
2
Build up marine industry cycle and take a holistic approach in industrial planning and urban design
3
Keep the long-term vision in current development
Formulate phased development strategy and reserve space for further city expansion and sustainable development
Develop the city from a multistructure perspective
4
Build a structured “communityblock-district” city framework and create a convenient, efficient and comfortable living and working environment Develop convenient transportation
Integrate natural environment into urban corridors
Integrate the natural environment with the five-colour corridors, using natural, sustainable development concepts
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6
Preserve the city’s unique feature
Design the downtown districts along the central axis of “ancient, modern, future" by integrating the culture of nature, sun and ocean
Match rail transport stations with urban planning and build out the city’s public transport system
Overall concept : extend from inland to the ocean, by leveraging the resources along the central axis (two centres, one island and the ten clusters) • “Two centres and one island” refers to the historical spot of the Yaowangcheng (King of Yao), the modern lifestyle centre of One Ocean World and the Future Island
Central axis
• The central axis represents the development ideology of Rizhao IOC connecting inland to ocean and past to future
Yaowangcheng One Ocean World Future Island
• “Ten clusters” (dashed line areas shown in the graph on the right) stand for the ten industrial areas along the central axis
Pacific Ocean
Rizhao IOC development timeline Design phase and construction start
2012
Startup area ready
Build up scale of industry clusters
Form a city with a balanced living and industrial environment
2013
2015
2020
Sources: Rizhao IOC Administration Committee
Investment considerations
Key considerations before investment
Support from Rizhao IOC
• Cooperation agreements with multiple universities and research institutions focusing on marine industry
Value chain
Logistics infrastructure
Human resources
Land supply and land cost
Utilities
• Infrastructure support covering the entire value chain of the marine industry. Examples include the installation of sea water pumping system for real estate climate control and the adoption of sea water toilet flushing system
• Heavy investment to improve transportation infrastructure. Rizhao International Airport and Jin-Zhong-Nan Railway currently under construction. Inter-city high speed railway lines to Jinan and QingdaoRizhao-Lianyungang Railway to start construction in the near future • A tax-free area is under planning, designed to benefit import/exportoriented companies in the zone
• Rizhao University and Scientific Park currently has 70,000 university students, with 40,000 pursuing 26 distinct marine industry related majors • Rizhao has 58 innovation centres at provincial level or above, among which 14 are marine focused. They provide the marine industry with 152,000 professionals
• Land in startup area is ready for construction • Rizhao IOC will reduce the investment cost by taking charge of basic facility construction(a)
• Nine kilometres’ underground utility tunnel is ready for a new public pipe system, which will avoid the problems of traditional pipe systems • Startup area’s pipe system for water, electricity and gas is currently under construction and is to commence in 2013
Labour cost
• Cooperation agreement with vocational training schools is expected to provide consistent labour supply and reduce training cost
Tax and other incentives
• A package of Tax incentives will be provided to investors in order to achieve a lower cost of investing in Rizhao IOC (for more information, please refer to page 10)
Notes: (a) Basic facility refers to: Land flatness; road building; construction of underground pipes for rain, sewage water; pipes for tap water, gas; access for gas, telecommunication, heat and cable Sources: Rizhao IOC Administration Committee; Rizhao City People’s Congress website
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07
Comparative advantages of Rizhao IOC
Location
Port capability
Land supply
Linking central China with East Asia and beyond
Top-ranked in logistics; Potential to grow
Abundant land available
Natural Favourable environment climate and highquality sea water
Labour cost
Lower labour cost
• Rizhao IOC is located in the southern part of Shandong Peninsula and the midpoint of China’s coastline. As a Yellow Sea estuary, Rizhao IOC is the key for central China’s import and export • Lying just to the west of Japan and South Korea provides Rizhao an easy commute to major east Asia cities such as Tokyo, Yokohama, Seoul and Pusan, which only requires a three-hour flight or three-days by ship
• Rizhao Port is China’s ninth largest coastal port by throughput and has direct transportation to more than 100 countries and regions globally. 2012 throughput reached 284 million tons • Rizhao Port owns advanced logistics infrastructure including a 300,000-ton mineral berth and a 150,000-ton coal mine berth. A projected port coastline of 29.7 kilometres underscores the port’s growth potential
• The planned area reached 169.7 square kilometres. As much as 28 percent of the area is for industrial and warehouse use, providing a large area for construction
• Suitable climate for cultivation of both northern and southern plants and aquatic products • The quality of sea water meets national first-class standard, which provides a positive environment for marine biology and industries using sea water
• Rizhao’s 2012 average wage for urban employee per capita was CNY 40,361, six percent below Shandong’s average and at least five percent lower than other major coastal provinces or cities
Sources: Rizhao IOC Administration Committee; Phoenix
Investment opportunities
Participate in Rizhao’s fast growing marine economy
Enter into regional markets enabled by convenient transportation
• Shandong has a developed marine economy covering sectors along the value chain. The province’s 2012 marine industry GDP reached CNY 946 billion, a 14 percent increase from 2011, representing nearly 20 percent of the nation’s marine industry GDP
• Highways and inter-city speed trains connect areas in Shandong Peninsula and south of Shandong
• Rizhao’s marine industry is the city’s key economic driver. Over 44 percent of the city’s total GDP in 2012 came from the marine industry and this share grew by two percent over 2011
• Convenient links to the East Asian markets will be provided by Rizhao’s two port areas and the upcoming international airport
Benefit from the region’s fast development • Rizhao’s GDP has been growing at a 15 percent CAGR over the past five years and is forecasted to be 12 percent through 2015 • Total value of import and export in Rizhao increased at a CAGR of 28.5 percent in the past five years and it aims to grow at a CAGR of 12 percent within the period to 2015 • Rizhao IOC’s CAGR for its GDP in 20122020 aims to be 42 percent
08
• The Jin-Zhong-Nan Railway will be ready in the near future and lower the cost of transportation to central and northwest China
Gain profitable return from low cost • Lower labour costs comparing with other coastal cities in China • Logistics and procurement reduced by leveraging the location being close to Rizhao steel and automobile manufacturing bases
cost can be advantageous Port, high-end and parts
• Investment preferential policies such as tax incentives are provided to the companies, as well as cost saving solutions for land usage
Rizhao IOC computer designed image
Sources: Rizhao IOC Administration Committee; People.com; Xinhua.net
09
Business and living environment
Quality residency options from rated hotels and apartments are available • Rizhao has more than 30 hotels with a rating of three-star or above and many economy hotels • The monthly rent for a two-bedroom apartment is about CNY 800-1200 (USD 128-192)
Rizhao’s international schools and hospitals offer convenience for expats’ education and medication • Rizhao EtonHouse International School was established in 2012 with a curriculum covering primary and secondary education • There are 25 hospitals in Rizhao. All are qualified to provide foreign-language medication service
Rizhao Wanpingkou Scenic Area
Rizhao’s pleasant living and tourism environment has been awarded with the UN’s Habitat Scroll of Honor Award • Rizhao’s average annual temperature is 12.6 ℃, with a summer average of 23.9 ℃ and winter average of 0.5 ℃ • Throughout a year, there are a total of 2,540 hours of sunny weather, giving Rizhao the nickname as China’s “Sun City of the East”
• As the “City of Water Sport”, Rizhao has built the Olympic Water Sports Park and held many sport events such as the International Sailing Championship • Golden beaches of 64 kilometres have attracted tourists from all over the world. In 2012, 28.24 million tourists visited Rizhao, a 15.2 percent increase from 2011
Incentive policies
Rizhao IOC provides investors with the following incentive policies(a) Policies
Contents
Land
For industrial projects, investors can purchase land use rights through the bidding process . After commencing operation, the company can enjoy 100% waiver in land use tax and construction maintenance tax in the first two years on condition that the reported tax per mu(b) exceeds CNY 10,000
Tax incentives
After commencing operation, companies enjoy a 50 percent tax return on the local residual of their value-added tax, business tax and company income tax. In the third year, the tax return rate is 30 percent
Fee incentives
In the process of new company registration and construction, companies enjoy a certain amount of managerial fee to be waived. A business process fee is charged based on the lowest standard
Case by case discussion
Rizhao IOC typically offers incentives on an individual case basis for investors with larger investment, higher technology or with other high-impact capabilities
Notes: (a) For more information, please contact Rizhao IOC Administration Committee (b) 1 mu = 667 square metre
Sources: Rizhao IOC Administration Committee
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11
Blueprint of Rizhao IOC
Startup Area
Sources: Rizhao IOC Administration Committee
Marine Equipment Manufacturing Area
Key industry Overview - the marine industry cycle
Marine Service Logistics, IT and financial services
Products application
Marine biology
Tourism, technology application
Application of equipment/ technology Purified water
Purified water
Comprehensive utilisation of Sea water
Cooling water
Onshore heavy equipment manufacturing Rizhao has manufacturing capacity of 750,000 automobiles, 6.2 million tons of oil and grain processing, 5 million tons of oil and grain processing, and 12 million tons of steel and iron processing
Sources: Rizhao IOC Administration Committee
An eco-friendly marine industry cycle can be built by cross-sector mutual support
Marine ecology
Equipment application
Rizhao’s sea water quality and natural environment is suitable for aquatic products cultivation and processing
Processing
13
Cooling water
Raw material / machinery parts
Raw material / machinery parts
Marine machinery
Rizhao has ship manufacturing capability of 250,000 tons and is expected to reach 2 million tons in 2015
Key industry Marine service
14
Rizhao IOC is closely linked to Rizhao’s two port areas which have rich marine culture such as ocean festival. These areas can be leveraged to develop marine service industries such as logistics and coastal tourism • Develop tourism projects such as cruise, yacht, marine science tour, ocean culture tour and water town tour
Coastal tourism
• Build up marine logistics, e-commerce, third party and fourth party logistics
Focus Areas
Logistics Research service
• Organize marine science and technology incubation center, R&D labs, intellectual property exchange service companies will be encouraged
Regional headquarters
• Attract corporate headquarters such as regional sales, financial settlement and service centres
Financial service Exhibition service
100 km coastline International airport
Sources: Rizhao IOC Administration Committee
• Plans to build exhibition venues and cultivate professional exhibition brands
4000-years’ history
200-million ton port
Central China Estuary
• Encourage venture capital, trust companies, companies in banking, security, financial leasing and wealth management to join IOC
Beaches
City of Water Sports
Sun Festival· Sun Worship Ceremony
Longshan Culture Relics
Ocean Voyage Festival
UN Habitat Scroll of Honor Award
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Key industry Marine engineering and machinery Rizhao IOC is close to Rizhao’s high-end steel manufacturing base, heavy marine machinery manufacturing base and ship building factories. This offers value chain and talent resources for the development of marine machinery sector China’s marine machinery sector has potential for demand growth and localisation
Rizhao is prepared to provide support for IOC’s development in this sector
• At present, 70 percent of China’s marine machineries are imported, and less than five percent of key instruments are built domestically
• Rizhao’s high-end steel manufacturing base has a production capacity of 12 million tons
• China’s current average proven rate for ocean oil and gas resources are 12.3 percent and 10.9 percent respectively which is below the global average level of about 50 percent. This underscores the large potential demand for marine machinery
• Rizhao’s marine machinery manufacturing base and Huahai Shipping Company have developed deep sea drilling platform and distribution equipment as well as a 250,000-ton shipbuilding capability and a 20,000-ton ship repairing capacity
Manufacturing for marine projects equipments
Marine new energy equipment manufacturing Build a research centre focusing on Rizhao’s marine new energy and the manufacturing of related equipment for harnessing tidal energy and wave energy
Manufacturing for marine projects equipments
Focus on the R&D and manufacturing of large marine equipment instruments and metres, auto-control system and telecommunication and navigation system
Marine new energy equipment manufacturing
Focus Areas
Onshore machinery manufacturing
Onshore machinery manufacturing
Special ship and cruise ship building Enhance ship building capability of special ships such as offshore operation ship, work craft, as well as cruise, yacht, race and sailing boat etc.
Special ship and cruise ship building
Develop manufacturing of onshore machinery including cranes, loaders and unloaders, and other transportation equipment
Sources: Rizhao IOC Administration Committee; “Accelerate in marine equipment manufacturing and avoid energy shortage”, Hexun; Xinhua; “China’s oil and gas has entered the Ocean Era”, People’s Daily
Key industry Marine biology Rizhao IOC’s mild climate, 16.5-kilometre coastline and marine science organisations provide advantageous foundations for marine biology industry, including aquatic product cultivation, food processing and aquatic materials
15.7 sq km2 for marine life cultivation South-north climate transition area Four aquatic species reserve area National first-class quality sea water
Eight National green cultivation demonstration area
Marine science research partner organisations Examples of marine science research partner organisations Organisation name Ocean University of China
Shanghai Ocean University The First Institute of Oceanography, State Oceanic Administration The Second Institute of Oceanography, State Oceanic Administration The Third Institute of Oceanography, State Oceanic Administration Institute of Oceanology, Chinese Academy of Sciences Chinese Academy of Fishery Sciences, Yellow Sea Fisheries Research Institute
Sources: Rizhao IOC Administration Committee
Focus Areas Marine functional food and cosmetics products • Develop marine functional food industry including processed food such as fish oil, marine algae and cosmetics industry including marine collagen and active peptides
Marine bio-material and marine enzyme • Develop bio-material industry in producing products such as carrageen and agar, as well as enzyme sector
Aquatic biological breeding • Build up an innovation platform for aquatic biological breeding. Develop advanced sea water breeding and cultivation technology and technologies for prevention and control of fish diseases
Marine biomedicine • Encourage investment from sectors such as medical preparation and genetic engineering. Develop modern marine medicine for anti-virus or cancer-prevention purposes
Marine drugs and marine contract research outsourcing (MCRO) • Establish public research platform for marine R&D and attract corporate and institutional research centres to develop R&D outsourcing sector
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Key industry Comprehensive utilisation of sea water
The national first-class quality sea water of Rizhao provides Rizhao IOC with quality resources to further develop sea water utilisation industry, including desalination, direct usage and chemical resources
Focus Areas Desalination
Research and develop key technology for production of high quality desalination films and devices, energy recycling devices and high-pressure pump
Direct use
Focus on technologies in developing sea water cooling system, eco-friendly water treatment, seawater desulfurisation and seawater treatment for daily usage
Chemical resource usage
Develop technology and equipment for magnesium, bromine, potassium, and uranium extraction to help complete the sea water treatment value chain
Objective: To be a national model for sea water treatment
Sources: Rizhao IOC Administration Committee
Key industry Marine ecology
In marine ecology, Rizhao IOC plans to focus on four sectors listed below. Rizhao IOC has signed research and technology support agreements with institutions such as Shanghai Ocean University to further drive this industry
Research and production of ocean environment repair equipment, pollution prevention devices and online environment detection devices
1
Ocean anticorrosion sector
2
Ocean environment devices manufacturing
3 Environmental
Research and industrialisation focus in areas such as tidal area steel corrosion
Sources: Rizhao IOC Administration Committee
Cooperate with national marine research institutions in developing marine new energy
devices for ship and offshore projects use
4
Marine new energy such as tidal and wave energy
Key areas include ship incinerators, sewage treatment equipment, oily water separators and crude oil wash equipment
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Key industry Coastal advanced manufacturing Rizhao’s two port areas and onshore manufacturing industry provide Rizhao IOC the value chain support to develop coastal advanced manufacturing, such as onshore equipment manufacturing and steel processing
Onshore equipment manufacturing
Development foundation Advanced steel manufacturing will further develop into the Southern Shandong Coastal Industry Cluster as mentioned in “Development Plan for Shandong Peninsula Blue Economic Zone” Rizhao Port area is an important estuary for Southern Shandong Economic Belt, which means the port is eligible to radiate the area as well as central China market
Focus Areas
Manufacturing of precision machinery, heavy machinery, new energy equipment, and new material industry: electronics, construction and packaging
Steel processing
Rizhao IOC is close to the two port areas of Rizhao port, advanced steel manufacturing base, automobile parts manufacturing base and oil and gas logistics and processing base
Steel plates and tube processing for use on automobiles, household equipment, ships, containers and oil pipes
Southern Shandong area and the coastal industry cluster Hebei Province
Bohai Sea
Shandong Peninsula Blue Economic Zone
Shandong Province
Southern Shandong Economic Belt
Rizhao City
Huanghai Sea
Southern Shandong coastal industry cluster
Sources: Rizhao IOC Administration Committee
Appendix Operating cost Land, office building cost Floor Standard factory building cost (single-deck lightweight steel Standard factory building cost (concrete Standard factory annual rent Office building monthly rent
CNY/m2
USD/m2
800
127.8
1200 70-100 15-18
191.7 11.2-16.0 2.4-2.9
Cargo delivery fee by highway, railway and by sea Destination Beijing Shanghai
CNY 6,200 6,000
Guangzhou
15,000
Highway USD 990.3 958.3
Destination (by sea) Singapore Tokyo, Yokohama, Osaka, Kobe Sydney, Melbourne, Brisbane North-western ports Los Angeles, Auckland New York
2,395.8
Days 1 1 4
CNY 3,086 2,576
Railway USD 492.9 411.4
6,529
1,042.8
USD 230 50 1,200 1,450 2,200 2,850
Days 1 1 6
Days 9 3 21 30 13 33
Notes: The cargo delivery fee above refers to delivering a TEU from Rizhao to the destination; The price is solely for reference purpose and it may fluctuate in relation to prices of raw material and fuel
Public facility cost Water (per ton)
Public facility For living use
CNY 2.81
USD
For industrial use
3.11
0.50
For living use Electricity (per kwh)
For commercial use
For industrial use Gas 3 (per m )
For living use For commercial and industrial use
0.45
0.4929-0.5469 0.0787-0.0874 0-1 kilovolt: 0.7753 0-1 kilovolt: 0.1238 1-10 kilovolt: 0.7603 1-10 kilovolt: 0.1214 35 kilovolt and above: 0.7453 35 kilovolt and above: 0.1190 1-10 kilovolt: 0.6411 1-10 kilovolt: 0.1024 35-110 kilovolt: 0.6261 35-110 kilovolt:0.1000 110 kilovolt and above: 0.6111 110 kilovolt and above: 0.0976 2.913 0.47 3.253
0.52
Notes: Above cost and fee are based on renminbi, except for sea shipping cost; Exchange rate: USD 1 = CNY 6.2609
Sources: Rizhao IOC Administration Committee; Rizhao Sanyun Logistics Company; boc.cn
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Appendix Management structure and company registration flow chart
Rizhao IOC organisational structure Rizhao IOC Administration Committee
General Office
Construction Bureau
Economic Development Bureau
Financial Bureau
Social Affairs Bureau
Investment Promotion Centre
Public Utility Management Centre
Companies registration flow chart Project feasibility report
Project discussion, evaluation and agreement
Enterprise name registration
Project establishment registration
Company registration procedures
Land use right procedures
Construction permit
Topo. map
Construction blueprint approval
Blueprint
Environment / Location / Land pre-approval
Environment report
Project establishment procedures
Domestic investment
Foreign investment
Pre-approval for special projects
Approval for foreign investment
Capital verification
Business license
Construction plan approval / Project bidding / Construction permit
Construction plan
Land certificate
Construction commencement
Sources: Rizhao IOC Administration Committee
Certificates (Quality inspection, tax, bank)
Business license
Certificates (Quality Inspection, foreign currency, bank)
Capital verification Certificates (tax, bank, customs)
Project commencement