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Tax Policy Did to Lure Capital in Drug Sector
China is mulling a more favourable taxation policy to encourage capital inflows into the country's pharmaceutical industry, a senior official said Thursday.

The Ministry of Science and Technology and other government departments are considering reducing or even exempting tax for developers of new drugs, a hot investment area.

Helping to spearhead the future of the pharmaceutical sector are the Ministry of Finance and the State Administration of Taxation.

Li Sujing, head of the policy division of the Law and Regulation Department of the Ministry of Science and Technology, Thursday revealed this to China Daily.

Taxation policy support will form a central plank in the strategy. It will form part of the consulting work the Ministry of Science and Technology plans to do with other State departments, Li said.

Policies in favour of Chinese herbal drugs development will also be considered, said Lin Xin, another division head with the ministry's Law and Regulation Department.

The Ministry of Science and Technology consulted the Ministry of Finance and the State Administration of Taxation, Lin said, but further discussion is apparently needed.

Li Sujing said overseas investors can expect to benefit from the new policies. China is now a World Trade Organization member and the policies should apply to both home and overseas business people, he said.

Research and development for new drugs are weak on the mainland although medical production has grown at an average 18 percent over the past five years. Most drugs are manufactured with copied technology that comes late at the mercy of advanced nations' patent law permits.

New drugs development on the mainland does not have special policy support though, Li pointed out.

Currently investors in the pharmaceutical sector on the mainland can make use of preferential policies for projects in high and new technology categories.

"The policies we're making will ensure new drugs developers enjoy more than that," Li said, adding he believed the pharmaceutical sector will be hotter as an investment site.

Expected new policies are unlikely to come out this year, Li said.

Many preliminary tasks must be initiated first. "I hope we'll start surveys next year and work out plans then," Li said.

In a telephone interview, Lin Xin stressed that on the mainland, an overseas investor can play up the weight of patent technology it has as Chinese policies have already lifted the ceiling on the proportion of intangible assets an investor places in the stock of a business.

To help acquaint investors with the mainland's market, the Ministry of Science and Technology is working with other ministries, State administrations and industrial associations to establish a national data base on technologies, Lin said.

The data base, also to integrate electronic networks owned by many ministries, commissions and associations, is aimed at helping business people make smart investment decisions to avoid low efficient start-ups, outdated techniques and encroachment of intellectual property rights.

Analysts said Hong Kong may benefit from the new policies particularly as pharmaceutical development in the special administrative region has widely been regarded as strong.

Actions should be taken in co-operating with high and new technology enterprises from Hong Kong, Macao and Taiwan, said the mainland's technical invention and renovation 10th Five-Year Plan (2001-05) issued by the State Economic and Trade Commission earlier this week.

The mainland is apparently stepping up efforts for new technologies as the central government is to slice more from State revenue for fundamental research.

In the five-year plan, the central government sets compulsory rules that some enterprises should set aside 5 percent of their sales income for research and development. Others should input at least 1.5 percent.

(China Daily June 28, 2002)

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