Experts: Reform won't shrink FDI
By Jiang Wei (China Daily)Updated: 2006-12-26 08:50 China's proposed unification of corporate income taxes will not cause any loss of foreign investment in China, experts in Beijing said.
The comments come hot on the heels of a meeting of the Standing Committee of
the National People's Congress (NPC), which met over the weekend to discuss a
bill that would reform the corporate income tax regime.
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According to the draft law, the country will unify income tax rates for domestic and foreign companies at 25 per cent. Chinese domestic companies currently pay 33 per cent income tax, while foreign companies, which benefit from tax waivers and incentives, pay an average of 15 per cent.
"We believe the tax unification will not result in big decreases in foreign investment in the country," said Hu Yanni, an analyst with China Securities Research of CITIC.
Experts believe that the preferable tax regime is just one of the factors that attract foreign investment while the key issues in China should instead be abundant human resources, social stability and an irreplaceable market.
Looking at long-term development in China, most foreign-funded enterprises are not expected to shift their investment strategy in China, said Lu Jinyong, an investment researcher at the University of International Business and Economics.
He explained that foreign companies were granted some favourable treatment
when they faced some investment restrictions in China in terms of industries and
share of stake.
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