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Ins and Outs of Policy to Expedite the Local Internet Industry

Chongqing People's Government issued the Guidelines on Accelerating Development of Internet Industry ("Guidelines") (YFF (2008) No. 117) on November 19, 2008. To facilitate the public to understand the policies concerning Chongqing Municipal People's Government to support and encourage development of internet industry in a timely and all-round way, Chongqing Bureau of Information Industry explains hot issues.
I. Background
The success of some internet enterprises boosts development of local economy during the fast-growing period of internet industry in China. However, there is a big gap between the economic and social development and development of internet industry in Chongqing (both in industrial scale and internal structure). As of 2007, the industrial scale of Chongqing was only RMB 600 million. The domain names of Chongqing accounted for only 1% of the national domain names and the quantity of local websites only accounted for 1.1% of that of the national websites. It is because of many restricted factors, including immature market, small scale of enterprises, poor technologies, unsound investment and financing system and insufficient policy support.
Bo Xilai, CPC Chongqing Committee Secretary, paid a special visit to Alibaba this year and advocate to “establish Chongqing's Alibaba”. Chongqing Bureau of Information Industry, after a special investigation on the local internet industry, formed the Report on Development of Chongqing Internet Industry. Wang Hongju, Mayor of Chongqing, provided important instructions on the Report and required proposals on promotion of Chongqing internet industry.
II. Main planning and detailed targets for development of internet industry in Chongqing
The main planning and detailed targets for developing internet industry in Chongqing as follows:
(I) Short-term target (from 2008 to 2010)
Establish internet industrial parks and streets in Chongqing preliminarily; make significant breakthroughs in setting up investment and financing system and reducing internet access fees; reduce access threshold for internet enterprises and operation costs considerably; introduce 2-3 leading internet enterprises at the national or international level and 3-5 venture capital institutions; form a pattern with various businesses and reasonable industrial structure preliminarily. 
(II) Mid-term target (from 2010 to 2012)
Further promote internet information products and services in trade, commerce & circulation, traditional manufacturing industries and vast rural areas; establish 5-10 renowned vertical websites for industries; realize interactive development of internet and traditional industries.
(III) Long-term target (after 2012)
Internet industry plays an outstanding role in leading regional coordinated development, optimizing the allocation of industry resource, reducing trade cost and promotion of commodity circulation and scaled operation. Establish the first highland for developing internet industry in west China. The application level of internet ranks top in China.
III. Measures for developing internet industry in Chongqing
“136 Program” are the measures: make Chongqing the first highland for developing internet industry in mid-west China; establish incubation platform, investment & financing platform and technical support platform for internet industries; establish and improve innovation & incentive mechanism, cost sharing mechanism, market monitoring mechanism, industrial service mechanism, talent cluster mechanism and market cultivation system of the industry.
IV. Preferential policies concerned
(I) Policies on investment and financing
According to the Guidelines, from 2008 to 2012, Chongqing Finance Bureau will increase special funds for new IT sectors and outsourcing to focus on developing the internet industry. The government should direct the social funds and venture capital to the internet industries by multi means, including subsidies, discount and awards. The people's government at district or county (autonomous county) level and municipal government should further support internet enterprises, encourage more guarantee funds to the internet industry, encourage foreign-invested and private capitals to invest into asset restructuring and shareholding reform of internet enterprises and encourage Chongqing internet enterprises to be listed for financing. An enterprise may be granted a subsidy of RMB 1 million at maximum.
(II) Taxation policies
The Guidelines provides that internet enterprises of Chongqing may be verified as software enterprises and outsourcing enterprises by Chongqing Bureau of Information Industry according to related regulations and may enjoy related preferential policies.
The internet enterprises which are qualified ICP (Internet Content Provider) or ISP (Internet Service Provider) should be registered in the category of “Advertising Sector” by the administrations of industry and commerce and should pay tax in accordance with national regulations, i.e., the enterprises engaged in advertising should be levied by 5% of the sales revenue as turnover tax. In addition, according to the CS (2003) No. 16, the turnover of enterprises which are engaged in advertising refers to the balance by deducting the advertising release fees, which are paid to other advertising companies or advertising publishers (including media and carriers), from the total sales revenue.
(III) Supporting polices for industrial parks
The Guidelines encourages capable districts or counties (autonomous counties) to set up internet industrial parks and incubation centers, and encourages the establishment and operation of internet-based service platforms in the industrial parks. The Guidelines also encourages internet enterprises to enter into the internet industrial parks and incubation centers to support establishment of one-stop service system in the park.
(IV) Policies on priority support and awards
The Guidelines encourages the national and internationally renowned internet enterprises to settle in Chongqing. A lump sum of RMB 500,000 - 1,000,000 may be granted to such enterprises as awards. With regard to an internet enterprise of which the headquarter (including the regional headquarter) is settled in Chongqing and has contributed to taxation, the industrial park where the enterprises is settled will grant some subsidies for construction and procurement of the self-use office buildings (including rental buildings). Chongqing will organize to release the billboard of internet enterprises (websites) in Chongqing every year and choose the excellent internet enterprises which will be awarded accordingly by the government. The activity is expected to start at the end of this year.
V. Related policies and means for inquiry
At present, Chongqing Bureau of Information Industry and Chongqing E-commerce Association are preparing for the rules for detailed implementing rules of the Guidelines. For details of policies, you may 1) visit the websites at http: www.cqit.gov.cn or www.cqeca.org.cn for inquiring policies concerned, 2) or make a call (67516981 or 67711461) for consultation of matters concerned.
   

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