China has announced a new plan to attract more foreign investment and improve its business environment, as it faces a slowing economy and rising tensions with the US and other countries. The plan includes measures such as tax incentives, visa facilitation, and opening up more sectors to overseas firms.
Tax Benefits for Foreign Investors
According to the plan released by the State Council, China’s cabinet, on Friday, foreign investors will enjoy preferential tax treatment in certain industries and regions. For example, foreign companies that invest in advanced manufacturing, modern services, or strategic emerging industries will be exempted from income tax for the first two years and enjoy a 50% reduction for the next three years.
Foreign firms that reinvest their profits in China will also be eligible for tax refunds, while those that invest in the central and western regions of the country will receive additional tax deductions. The plan also promises to simplify the tax filing procedures and strengthen the protection of intellectual property rights for foreign investors.
Visa Convenience for Foreign Employees
Another measure that aims to attract more foreign talent and investment is to make it easier for foreign employees of overseas firms to obtain visas and residence permits in China. The plan states that China will implement a more flexible and convenient visa policy, such as extending the validity period of visas, allowing multiple entries and exits, and reducing the application time.
China will also issue more residence permits to foreign employees who meet certain criteria, such as having a bachelor’s degree or above, working in key industries or regions, or having a high-level professional qualification. The plan also pledges to improve the social security and medical insurance system for foreign workers and their families.
Opening Up More Sectors to Foreign Firms
The third major aspect of the plan is to further open up China’s market and industry sectors to foreign investment. The plan states that China will accelerate the implementation of the negative list system, which specifies the sectors that are off-limits or restricted for foreign investors. The negative list will be revised and shortened regularly to expand the scope of market access for foreign firms.
The plan also lists some specific sectors that will be opened up or relaxed for foreign investment, such as biopharmaceuticals, telecommunications, education, culture, health care, and transportation. Moreover, the plan encourages foreign firms to set up regional headquarters, investment companies, and research and development centers in China.
A Response to Economic Challenges
The new plan comes at a time when China is facing multiple challenges to its economic growth and stability. The country’s gross domestic product (GDP) grew by 7.9% year-on-year in the second quarter of 2023, down from 18.3% in the first quarter. The slowdown was partly due to the impact of the Covid-19 pandemic, which has caused disruptions in production and consumption.
China is also facing increasing pressure from the US and other countries over its trade practices, human rights issues, and geopolitical ambitions. The US has imposed tariffs and sanctions on Chinese goods and entities, while also restricting Chinese investment and technology access in its market. Other countries have also expressed concerns about China’s policies on Hong Kong, Xinjiang, Taiwan, and the South China Sea.
By announcing the new plan to attract foreign investment, China is trying to show that it is still open for business and willing to cooperate with other countries. The plan also reflects China’s need to diversify its sources of growth and innovation, as it seeks to transition from a low-cost manufacturing economy to a high-tech service economy.
