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New corporate tax structure should do wonders for the economy

By Xin Zhiming (China Daily)
Updated: 2007-03-20 08:53

It is expected to further encourage foreign investment by high-tech companies, though China has been emphasizing such investment ever since it opened the doors to foreign funds, said Han.

Many foreign investors export their products, which will help China improve its export structure by increasing the value added of the goods it ships.

"Although it will be a long-term process, it will happen," said Wang.

The new law will also reduce the tax burden on domestic companies, which should enable them to concentrate more on domestic marketing.

"Many domestic enterprises have found it hard to sell domestically given the weak domestic demand," said Wang. "As a result, they choose to sell overseas."

With stronger balance sheets, domestic firms should have more room to maneuver within the domestic market, said Wang.

This will somewhat ease international pressure on China, which has seen its foreign trade surplus swell in recent years - the trade surplus hit $177.5 billion last year, up 74 percentyear-on-year.

The new tax law also stipulates continuing tax breaks for the vast, but economically backward western regions, which should bring more balance to the country's economic development.

"This is good news for the western regions, but also for China as a whole in the long term," said Wang.

The country's eastern coast is home to about 90 percent of the country's foreign-invested enterprises and the source of most of its exports.

As the new law takes effect, the eastern regions may see some of their foreign investment move west, noted Wang.

This should bring more capital to the western regions and help speed up their industrialization, he added.