Cayman Islands, step aside. Private equity funds seeking to cut their tax bills have a new option some 3,600 metres above sea level, at the foot of the Himalayas. The only catch is, they will be playing a role in China’s strategy to tighten its grip on Tibet.

The government of Shannan prefecture, which lies in Tibet between Lhasa and the Buddhist kingdom of Bhutan, is offering generous tax breaks and other sweeteners in an attempt to make itself a home to private equity funds and investment companies.

Cities across China already compete for investors, but lawyers and advisers say the package of incentives available in Shannan, known as Lhoka in Tibetan, is unusually aggressive and is beginning to attract interest. The enticements for private equity funds are part of the Chinese government’s push to develop the region’s economy at the same time as establishing firmer control over it.