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New Frame of China's Policies Encouraging Foreign Investment (1)

China has recently promulgated a package of new policies to further encourage foreign investment.

These policies, together with those issued in the past have formed a new frame of policies concerning foreign investment, covering a full spectrum of areas, such as financial, taxation and foreign exchange control, additional preferential treatment specially for foreign investment in the central and western parts of the country.

Finance:

1.  permitted to accepIf foreign-funded enterprises seek financing within the territory, Chinese capital commercial banks aret guarantee by shareholders of the foreign side; Foreign-funded enterprises are permitted to apply for Renminbi loans from Chinese capital foreign exchange banks in the Chinese territory with foreign exchange as hypothecation.
2. In order to ease capital inadequacy of the Chinese side when Sino-foreign joint ventures expand capital, special industrial investment funds will be set up, and Chinese capital banks within the territory are permitted to grant loans for share capital to the Chinese side.
3. Foreign-funded enterprises in China are permitted to apply for loans from Chinese capital banks with overseas assets of their foreign partners as mortgages.
4. Foreign-funded enterprises are permitted to apply for A- or B-stock issues.
5. Insurance services may be provided to foreign investments in some fields.

1. Income tax may be levied at a confessional rate of 15% or 24%.
2. The income tax rate may be reduced for special industrial projects in some regions.
3. Regular preferential treatment will continue to be implemented, such as exemption (of enterprise income tax) for the first three years of operation and 50% reduction for another two years".
4. Foreign investors are encouraged to launch enterprises that are export-oriented and use advanced technology, transfer advanced technologies, and expand investment. There are lots of preferential treatment, such as tax reduction, exemption and refunding, in this aspect.
5. The newly promulgated policies provide that turnover tax may be exempt on technology transfer from foreign enterprises to domestic units, and if the technology is advanced or the terms are preferential, the enterprise income tax may, after approval, be exempted. Under given conditions, foreign-funded enterprises that buy domestic equipment may be exempted from the income tax or have the value added tax paid refunded.
6. The new policies greatly expand the scope in which import duty and import link tax are exempted on imported equipment.