Zhao Hong, vice-director of the Beijing Economic Research Institute of the Academy of Social Sciences, demonstrated that headquarters economy could achieve a win-win outcome for regional economy.

"This type of management becomes a chain of industy and market. The headquarters is in fact the supervising center for its activities in this region. In short, ‘all commercial activities and benefits resulted from this operation’ is known as the ‘Headquarters Economy'" said Zhao.

According to Zhao, there are two positive consequences of headquarters economy. First, it promotes regional cooperation and ends vicious competition. He said that currently there were three major regional economies in China; the Pearl River Delta, the Yangtze River Delta and the Bohai Sea Region.

However, business cooperation in the Bohai Sea Region is difficult to achieve, as competition between Beijing, Tianjin and Hebei is out of control. This competition causes an obstacle for regional cooperation and wasteful duplication.

He stated that headquarters economy provided Bohai Sea Region with a new model of cooperation and it would change the vicious competition into a friendly cooperation. “For instance, a project can be implemented on either part of the business chain mentioned above. A headquarters can be set up in one place and a factory in another pace. In this way, the win-win outcome is realized”, he commented.

The second consequence of headquarters economy, Zhao said, is that the regional consumption will be promoted. Headquarter economy can effect consumption in five ways. Firstly, the enterprise contributes local taxation. Accounting departments are normally set up in headquarters; therefore, the company turns in parts of its tax to the local taxation administration.

Secondly, the staff at the headquarters have comparatively high income, so the personal income tax is a considerable amount of income for the local taxation administration. At present, the personal income tax is the second major taxation resource in Beijing.

Thirdly, it promotes more consumption. Headquarters spend a great amount of money on research and development, transportation and communication. In addition, their employees form a white-collar stratum in the region where their headquarters is located.

Fourthly, headquarter economy has an influence on society. The more headquarters there are in a given area, the more they will raise the quality of life. Meanwhile, the region will become more multi-cultural, more open-minded and more cosmopolitan.

Finally, they create more working opportunities in tertiary industries.

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