For international businesses who consider making a direct investment in China, one of the most important documents to review is the Catalogue of Industries for Encouraging Foreign Investment. The Catalogue identifies industries where foreign direct investment (FDI) will be welcomed and treated with favorable policies in China. The most recently updated Catalogue contains a total of 1,235 items covering a wide range of industries.
Favorable treatment available to foreign-invested enterprises (FIEs) in encouraged industries that meet the requirements includes:
- Tariff exemptions on imported equipment – The import of self-use equipment within the total amount of investment can be exempted from customs duties
- Lowered corporate income tax (CIT) – The CIT rate can be reduced to 15% compared to the normal 25%
- Access to preferential land prices and looser regulation of land usage – Land can be preferentially supplied for projects with intensive land use and the land transfer price can be much lower
What does this mean for foreign investors in China?
A foreign investor investing in China should check if its intended business falls within the encouraged industries. If so, make the relevant filing before applying for the favorable treatments.
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