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29 December 2017
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| China tax (The Total Investment & Insurance Solutions) |
China is responding to Washington's tax overhaul by offering foreign
companies a break on Chinese taxes in a bid to retain investment.
The measure announced late Thursday is
Beijing's first major reaction to the U.S. decision to cut corporate tax rates.
It follows a flurry of promises by communist leaders to spur growth in the
slowing, state-dominated economy by opening more industries wider to foreign
companies.
Foreign companies will be exempt from
withholding taxes on profits they re-invest in industries specified by Beijing,
the Finance Ministry and tax agency announced. It is retroactive to Jan. 1,
2017, meaning companies would receive a refund on taxes paid this year. The Total Investment & Insurance
Solutions
Beijing wants to "attract foreign
investors after a host of countries unveiled similar measures to lure foreign
and domestic investment," the official Xinhua News Agency said. The Total Investment & Insurance
Solutions
The exemption will apply to companies that re-invest
profits in industries cited in government investment catalogues, the
announcement said. Those include solar and wind power, "green
farming" and other fledgling fields in which Beijing is trying to develop
technology. The
Total Investment & Insurance Solutions
Supporters of the U.S. changes enacted this
month say it will encourage investment in the United States. Governments
including Canada and private sector analysts have warned that could draw money
away from their economies.
It was unclear whether China's tax break was
significant enough to influence investment decisions in emerging industries in
which foreign companies complain they are shut out of promising areas or face
pressure to hand over technology to potential Chinese competitors.
China has long been among the top global
destinations for investment but foreign enthusiasm is cooling. Surveys by
business groups show companies are shifting emphasis to other Asian economies
seen as more profitable or less restrictive. The Total Investment & Insurance
Solutions
The Organization for Economic Cooperation and
Development ranks China 59th out of 62 countries in openness to foreign direct
investment.
Chinese official data show foreign investment
into this country grew just 1.9 percent in the January-October period over a
year earlier but jumped up in November. However, Chinese economists say that is
a poor measure of foreign interest because the bulk of it is money brought home
by Chinese companies and disguised as foreign investment to gain tax breaks.
China is a key market for autos, aircraft,
smartphones, cosmetics and other goods. But Beijing bars foreign companies from
fields including finance, telecoms and utilities. In others, companies are
required to work through local partners that might become competitors.The Total Investment & Insurance
Solutions
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