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Flow of FDI to Become a Torrent
China expects a bigger flow of foreign direct investment (FDI) after it becomes a member of the World Trade Organization (WTO), experts said on Sunday night.

"Accession to the WTO will be a blessing for China's utilization of FDI -in spite of negative factors such as the end of favourable tax policies for foreign-funded companies," said Zhang Liqun, a senior research fellow with the Development Research Center under the State Council.

China is now practising dual-track enterprise income tax policies for domestic and foreign-funded companies.

The virtual burden of income taxes for domestic enterprises stands at 22 percent while that for foreign-funded firms was 12 to 15 percent.

The country will adopt a unified tax system after entry into the WTO so that domestic and foreign companies can compete on an equal footing, Zhang said.

But the WTO accession means more than the loss of favourable tax policies for foreign companies. "They will have more access to the Chinese market," Zhang added.

China will gradually open the sectors of banking, insurance, telecom, trade and tourism, and explore new forms and channels to use foreign funds, he said.

Meanwhile, the country will provide an improved market system after the WTO entry. "This includes a more complete and transparent legal system, more open markets and more efficient administrative practices."

China should combine its efforts to attract foreign funds to readjust its industrial structure, develop the western region of the country and deepen the reform of State-owned enterprises, he said.

Zhang Yaxiong, a senior economist with the State Information Center, said China continues to be the highest foreign investment destination in the world.

Statistics from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) indicate that China used US$27.4 billion of FDI in the first eight months of this year, an increase of 20.4 percent from the same period of last year.

The FDI contributes about 20 percent to the fixed assets investment, which contributes about 30 percent to the gross domestic product (GDP), Zhang said.

"The increasing FDI is mainly because China's economy has maintained good momentum of growth despite the slowdown in the world economy," he said.

During the first half of this year, China's GDP grew 7.9 percent year-on-year.

Zhang said the country's economy will continue to develop along a healthy track of fast growth, high efficiency and low inflation. And the inflow of FDI in China will continue to grow rapidly in the coming years.

The increasing inflow of FDI will not only help increase investment in fixed assets, but also help usher in advanced equipment and technology, as well as up-to-date management methods.

(China Daily 10/08/2001)

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