The government of Hengqin, Guangdong Province, issued a new administrative rule on human capital for the Hengqin New Area of Guangdong Pilot Free Trade Zone at a meeting on Dec 29, 2016.
According to the meeting, the rule would be carried out on Jan 1, 2017.
According to the rule, the first of its kind in Guangdong, the research and development talent and management talent of the technicians, executive managers and marketing personnel can be transformed into capital share, which will contribute to corporate enterprises. As such,‘human capital share' can account for a maximum of 30 percent of enterprises' registered capital.
The rule is only applicable to limited liability companies registered in the Hangqin New District of Guangdong FTZ.
The company should clarify the assessment method it uses to calculate the human capital share, as well as its shareholders' rights and obligations.
The assessment should be conducted by all of the company's shareholders, or by a third-party appraisal agency, which should be approved by all shareholders.
Wu Chuangwei, head of Hengqin New District's industrial and commercial bureau, said: "When we made the rule, we attached great significance to company autonomy and the market's role in calculating the value of human capital. It entitles shareholders the freedom to make the decision on the practical value of the human capital," Wu added.
As long as the technicians, marketing talents and executive managers fulfill their labor contract with the companies, they are contributing their shares to the enterprise.
The contribution of human capital is a widely-discussed topic. Experts say the rule of Hengqin marks the point when human capital is transforming from concept to practice. This is in line with Hengqin's development concept that "Talent is the No 1 resource in economic and social development", and is conducive to improving the rule-of-law based business environment in Hengqin.
In March 2016, Zhuhai city where Hengqin belongs to, implemented a regulation promoting private-sector growth, stating that human capital can be transformed into share contributions.
Liu Heng, a professor of public law studies at Sun Yat-sen University, said: "Hengqin's rule, if well implemented, will be a breakthrough which transforms policy into reality."
Wu said,"a big difference between the knowledge economy and the industrial economy is that the former relies more on science, technology and knowledge than on currency, land, workshops, machinery and equipment. Therefore, establishing the institutions of human capital meets the requirements of the development of a modern enterprise system in the knowledge economy era."
The capitalization of talents, expertise and techniques is a win-win process for both enterprises and individual talents, he added.
Zhongguancun of Beijing, Pudong of Shanghai and Wenzhou of Zhejiang province previously piloted the reform. But none have gone beyond a pilot program. Wu thinks the new rule issued by Hengqin authority is more detailed and practical as it has rules on almost every aspect of the reform,as well as risk prevention and control mechanisms.