China's Preferential Policies for Foreign Investment

The Chinese government has and will continue to adopt a series of policies and measures that encourage foreign investment, according to Shi Guangsheng, minister of foreign trade and economic cooperation.

Shi, who spoke at the Fourth China Fair for International Investment and Trade, which opened Friday in the Xiamen Special Economic Zone in east China's Fujian Province, said that the Chinese government will be dedicated to the cultivation of a stable and comfortable environment in order to attract more foreign direct investment (FDI).

The Chinese government first of all, encourages the technical development and innovation of foreign-invested enterprises (FIEs), Shi said. Research and development equipment, supporting technology, accessories and spare parts imported by foreign investors for self-use may be exempted from tariff and import linkage tax.

Enterprises whose investment in technical development witness an increase of over 10 percent over that of the previous year, upon approval, are allowed to offset the taxable income for the year with 50 percent of the actual value of their technical development investment.

Foreign-invested enterprises also enjoy preferential treatment in transferring technology into China and buying equipment developed in China.

Secondly, Shi said, the Chinese government encourages foreign businessmen to invest in the central and western regions of China. Foreign investment in the projects listed in the "Priority Industrial Catalogue of Foreign Investment in the Central and Western Region" offer preferential policies.

Enterprises investing in these areas will not be required to pay tariff and import linkage tax on equipment, supporting technology, accessories and spare parts imported for self-use.

Shi said, there will be more areas attracting foreign investment in the central and western regions, while the conditions setting up FIEs will be relaxed and the same is true with the equity holding proportion of FIEs.

The FIEs in central and western China will receive an extended reduction and exemption period for corporate income tax. Reinvested projects in the central and western region by FIEs with foreign capital exceeding 25 percent can enjoy the same treatment as FIEs.

The FIEs in the coastal areas are allowed to contract the operation and management of FIEs and domestic-funded enterprises in the central and western regions.

At the same time, according to China's commitments in the WTO accession, the Chinese government will gradually open areas in service trade to the outside world. Foreign direct investment (FDI) absorption will further promote commerce, foreign trade, finance, insurance, securities, telecommunication, tourism and other fields.

The geographic location of foreign-funded retail enterprises has been expanded to provincial capital cities, municipalities directly under the administration of the central government and Special Economic Zones (SEZs) all over China. The FDI attraction in foreign trade sectors will also be further enlarged on the basis of accumulative experience.

The Chinese government will also allow qualified FIEs to go public in China's A stock and B stock market. Investment companies in China established by multinationals will be allowed to expand their scope of operations. Value appraisal of imported equipment of wholly foreign owned enterprises will be straightened out and adjusted. Policies that are not conducive to absorbing foreign funds will be cleared and adjusted.

The Chinese government will actively explore new ways to expand foreign investment, perfect relevant laws and regulations and intensify the formulation of policy measures for foreign participation in the restructuring of Chinese enterprises to support and promote foreign involvement through mergers, acquisition or other methods.

China will continue to introduce technology, capital, managerial experience and operational systems to improve the ability and scale of FIEs, and the ability and scale of supporting production and services in state-owned enterprises (SOEs).

China will push forward the reform and development of SOEs and optimize the adjustment of technical and product structures.


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