China temporarily waives taxes to get foreign firms to stay


China will temporarily waive income taxes for foreign companies on profits they reinvest in the country as Beijing battles to retain foreign firms and investment.

The finance ministry announced Thursday the new tax policy, which will apply retroactively from January so businesses will be able to take advantage of the exemption for this year’s taxes.

The new incentives for foreign business to keep their earnings in China follow the passing last week of a corporate tax overhaul in the United States.

The US reform will lower the tax rate for most corporations to 21 percent. Businesses in China pay 25 percent.

The temporary exemption “will create a better investment environment for foreign investors and encourage foreign investors to sustain their investments in China,” a spokesman for the ministry of commerce said.

The policy announcement also comes as China has struggled with capital flight and tightened capital controls this year to stem the outflow of money.

But foreign companies have long complained of the onerous bureaucracy they must navigate, barriers to market access, and policies that favour local firms.

The new tax incentives aim to make China more attractive but come with a slew of restrictions.

To be eligible, the profits must be invested in industries and activities where the Chinese government encourages foreign investment: manufacturing, services, research and development.

Locations in the west of the country are also prioritised for development.

Companies have three years to apply for the exemptions after paying tax.

Beijing has been keen to retain foreign investment after it fell in 2016. But commerce ministry statistics show that foreign direct investment ticked upwards for the first 11 months of this year, when compared with last year.

Vice Finance Minister Zhu Guangyao told a Phoenix TV finance forum earlier this month that China could not ignore the spillover effects from the change in tax policy of the world’s largest economy.

China must carry out policy trials, he said.


China will now live off the backs of the trillions in reserves it has managed to suck from the US and will still be able to out compete on wages. The only way the US maintains itself is to create generations of frugal shoppers… but the US treasury will not like that idea at all…


I’m so sick of the damn Chinese. There has to be something that the US can do to counteract this. They have played games with currency manipulation for years and now they pull this in direct response to President Trump lowering the corporate tax rate.


Either frugal shoppers of discriminating shoppers who look for made in the USA.

China has pretty high taxes on business offset by cheap labor. China has ended the ability for local government to hand out incentives to draw feign investment. Companies doing business in China are subject to numerous taxes, including a CIT at 25 percent and a withholding tax on dividends, interest and royalties, all of which are 10 percent. They are also subject to a value added tax (VAT) of between 13 and 17 percent and a business tax (BT) of between three and five percent on companies. At the start of 2012 however, China launched a massive reform to replace BT with VAT, which is expected to eliminate the risk of double taxation and reduce the tax burden for companies. With the business tax decrease in the US, China is now facing the issue of higher taxation rising labor costs which force US companies to revisit the use of China as a manufacturing base.
I suspect few will do anything as the Dims have threatened to roll back the business tax cuts until after the next election.


True that…


Do they even have enough seats to do that? I thought this was a done deal. If they can do this with such a small majority then I have to wonder why the hell Republicans didn’t put up more of a fight during 8 years of Obama’s bullshit. This is infuriating.


They cannot do anything until 2020 and that’s only if a Dim takes the WH.

As a business person would you move manufacturing back to the US for 2-3 years and the be faced with the potential higher costs of moving to the US then off shore again?


Because… as we have seen on full display for this last year… not all republicans are republicans… and some of them didn’t see what Obama was doing as BS…