China is striving to become more inviting to FDI and foreign talent by widening market access and improving the business environment. On 28 July 2017, the decision was made at a State Council executive meeting presided over by Premier Li Keqiang.
The negative list-based market access regime for foreign capital, already in trials in the country’s 11 free trade zones, will be rolled out nationwide as soon as possible, and more sectors will be more open for FDI. Profits at foreign-invested companies will be guaranteed free flow out of China.
To make China more appealing to foreign talent, the government will put in place a work permit system for foreigners working in China, with detailed guidelines for visa application and evaluation benchmarks for widened access to foreign talent to be developed in the second half of this year. Five- to 10-year multiple entry visas will be issued to qualified expatriates, who can apply for work permits and work-related residential certificates accordingly.
According to the Ministry of Commerce, inbound FDI fell by 0.1 percent year-on-year to 441.54 billion yuan ($65.5 billion) in the first half of this year, but the number of newly launched foreign enterprises in China was up by 12.3 percent. In a sign of stabilizing FDI, the inflow rose by 2.3 percent in June year-on-year, to 100.45 billion yuan.
A report released by the American Chamber of Commerce Shanghai earlier this month showed that about 77 percent of US companies in China surveyed are making profits, with 73.5 percent of companies reporting revenue growth in 2016.
Tax deferral will be extended to foreign investors if their local profits are invested in preferential fields. It will also promote the integration between FDI and outbound investment and encourage multinationals to set up regional headquarters in China.
The flow of FDI to the country’s western and northeastern regions will receive extra support. The Chinese government will increase the inter-connectivity of information systems between different departments, and pilot single window and single form registry for foreign enterprises in the filing of records and business registration process.
Exemption of withholding tax on dividend income will be available if a foreign investor reinvests the dividend directly in encouraged projects in China. Under the existing Corporate Income Tax (CIT) Law, a dividend declared to a foreign investor is subject to a 10% withholding tax, unless otherwise reduced by a tax treaty.
The tax incentives for a technology advanced service company (TASC) will be rolled out nationwide in China such as, reduction in the CIT rate from 25% to 15%, increasing in the employee education expense deduction limitation of total salaries and wages from 2.5% to 8%.
In accordance with the State Council Executive Meeting, the Plan would be implemented by the end of September 2017.
